Vietnam hikes key rates in inflation fight
Print 
Vietnam's central bank raised two key interest rates on Friday as it battles soaring inflation, which economists expect to be exacerbated by rising fuel prices.
The State Bank of Vietnam hiked the reverse repurchase rate which it charges banks for loans via open market operations to 13 percent from 12 percent, according to an announcement seen by Reuters. A central bank official confirmed the change.
The bank also lifted the refinance rate to 13 percent from 12 percent where it had stood since March 8, the central bank said in an announcement.
The Australia & New Zealand Banking Group (ANZ) said in a report that the increase in the OMO rate would "contribute to reining in credit and money growth".
"As inflation pressures persist, we expect the SBV will need to hike its key interest rates further to 14-15 percent this year, which will set the stage for more moderate inflation and higher growth in 2012," it said.
The Vietnamese government has been grappling with double-digit inflation for several months, and in February announced it would tighten monetary and fiscal policy to stabilise the economy.
The State Bank of Vietnam has increased several key interest rates, some multiple times, since Feb. 17.
The latest interest rate hikes come after the government's General Statistics Office released data this week and last that showed economic growth decelerating but inflation remaining high.
The annual consumer price index in March rose 13.89 percent, the GSO said, its highest level in 25 months.
On Tuesday the Finance Ministry announced increases in the price of petrol by 10.36 percent and raised the price of diesel by 15.3 percent. It was the second double-digit hike in fuel prices since late February.
The ministry said it expected the fuel price rises to add 0.4 percentage point to the monthly consumer price index in April.
Dragon Capital, a Vietnam-focused fund management firm, said it now expected annual inflation to a peak above 16 percent and remain over 15 percent through the third quarter before ending the year at 12-13.5 percent.
Meanwhile, economic growth slowed to 5.43 percent in the first quarter of the year from 7.34 percent in the last quarter of 2010, which some economists interpreted as evidence that the government's measures to stabilise the economy were starting to bite.
The central bank's last increase of the reverse repurchase rate was on Feb. 22, when it hiked the rate by 100 basis points. It has been increased 6 percentage points since early November in the face of high inflation.
