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SBV not to loosen monetary policies even on lower inflation
Governor of the State Bank of Vietnam (SBV) Nguyen Van Giau yesterday stated that SBV would not reduce the required compulsory reserve ratio on deposits, despite the clear signs of inflation decreasing.
The statement was an official answer to arguments about whether the central bank will loosen the tightened monetary policies as the difficulties of the national economy have been eased (reducing compulsory reserve ratio, cutting basic interest rates, lifting the 30% limit of credit growth rate).
Prior to that, the State Bank, in an effort to tighten the monetary policies, decided to raise the compulsory reserve ratio on VND and US$ from 10% to 11%, commencing February 1, 2008.
Reuters quoted Nguyen Van Giau as saying that the compulsory reserve ratio will not see any changes, confirming that the monetary policies will be in harmony with the government’s policies, which aim to reduce the inflation rate to below 10% by the end of 2009.
Giau’s statement has been supported by other economists. In an interview with Vietnam National Television, Country Director of the Asian Development Bank Ayumi Konishi said that Vietnam should not loosen monetary policies at this moment. The director said that the last months of years always see consumer prices increases associated with credit growth. Therefore, if Vietnam loosens the monetary policies at this moment, inflation might increase again.
On the viewpoint that the continued tightened monetary policies will cause big difficulties for enterprises, Mr Konishi said that lowering interest rates is not necessarily the best solution for enterprises. He said that if inflation continues increasing, enterprises will have to cope with more difficulties.
The recent report by Morgan Stanley also said that Vietnam should continue tightening the monetary policies in the next four months. The interest rates will decrease only when inflation decreases to levels that ensure real positive interest rates for deposits. Though the liquidity of banks has improved, it is not stable yet as the interbank interest rate remains high at 19.8%, much higher than 9% earlier this year.
On August 27, the petrol price was lowered by 5.6%, a move believed will help reduce the CPI in the time to come. Before the petrol price decrease decision was released, experts in the taskforce on domestic market regulation predicted that the inflation rate would be 1-1.2% in September, lower than 1.56% in August.
In the latest news, on August 29 in the morning, the central bank decided that the basic interest rate for September will be 14%, the same as for August.
Moreover, the central bank has decided to raise the interest rates the bank pays for compulsory reserves from commercial banks.
Commercial banks will enjoy the interest rate of 3.6% instead of 1.2% for the compulsory reserves, commencing September 1, 2008.
VNN
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