Vietnam central bank to keep benchmark rate unchanged 

Last updated: 11/29/2010 17:00 

Vietnam will leave its benchmark interest rate unchanged in December even after inflation accelerated to a 20-month high.

The so-called base rate will stay at 9 percent from Dec. 1, the State Bank of Vietnam said in a statement on its website Monday, after raising the benchmark from 8 percent on Nov. 5 for the first time in almost a year.

The central bank boosted rates and the government said it won’t weaken the exchange rate as policy makers tackle price pressures. Consumer inflation quickened to 11.09 percent this month from a year earlier, exceeding the administration’s target of no more than 8 percent in 2010.

“Although inflation accelerated, interest rates are already too high for companies who want to borrow,” Giang Trung Kien, the Hanoi-based head of research at FPT Securities Joint- Stock Co., said before the announcement. 

“Keeping the benchmark interest rate unchanged was the most likely outcome.”

The State Bank of Vietnam weakened the currency’s daily reference rate by 2 percent to 18,932 per dollar on Aug. 18, citing the need to curb the trade deficit. The dong traded at 19,499 per dollar at 4:15 p.m. in Hanoi from 19,099 before the devaluation was announced.

The government also devalued the currency in February this year and November 2009. A weaker dong can push up import costs and stoke consumer price growth.

Interest rates for dong loans at Vietnamese banks have risen to as high as 20 percent, the Nguoi Lao Dong newspaper reported on Nov. 25. Deposit rates increased to as much as 15 percent, the Lao Dong newspaper said Nov. 26.

Vietnam’s economy may expand 6.7 percent in 2010, Prime Minister Nguyen Tan Dung told the National Assembly last month. The administration will target growth of up to 7.5 percent next year and an inflation rate of about 7 percent, he said.

Source: Bloomberg

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