Vietnam central bank told to focus on Inflation

The Vietnamese Prime Minister, Nguyen Tan Dung, has expressed his view that the central bank needs to focus on interest-rate policy, in order to fight against the rising threat of inflation amid fears that the government is focusing more on economic growth.

In his statement, he asked the central bank to adjust interest rates in order to bring them closer to market rates, with the base rate being used as a toll in order to help control inflation.

Consumer prices have increased by more than 21 percent year-on-year in April which is the highest since 1992.

Inflation has been caused by the cost of food and energy prices which has caused widespread anger and labour unrest in the country.

Following Dung’s plea, the central bank this week boosted its base rate to 12 percent from 8.75 percent, and it is predicted that interest rates are likely to rise again.

Prior to the rate increase, the State Bank of Vietnam had attempted to deal with rising prices by tightening credit and cutting the money supply, although this has evidently not worked.

In the meantime it seems as though these fears are warranted as the current period of rising rice prices are expected to add 0.2 percentage points to the country’s inflation, already at a 10-year high of 1.2%.

Story link: Vietnam central bank told to focus on Inflation