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Central bank hikes key interest rates
The State Bank of Viet Nam on Apr. 1 raised two key interest rates to 13 per cent per year in an attempt to fight the rise in the consumer price index recently fuelled by the petrol and oil price hike.
The refinance interest rate has been increased for the third time this year to 13 per cent from 12 per cent. The rate was raised from 9 per cent to 11 per cent on February 17 and to 12 per cent on March 8.
Market insiders said the 4 percentage point increase within three months seems to indicate a strong determination of the central bank to tighten monetary policy.
The reverse repurchase interest rate was raised by 1 percentage point to 13 per cent, while the prime interest rate has been retained at 9 per cent since last November.
"Today's rate hike was in line with our expectations," ANZ commented yesterday after the central bank's decision.
"Q1 growth might have dipped but March inflation surged to 13.9 per cent year-on-year, and will increase further as domestic demand stays strong and rising food and fuel prices complicate the picture."
The General Statistics Office showed a lower GDP growth in Q1 of 5.43 per cent (Worth VND441.707 trillion or US$21.03 billion) from 7.34 per cent in the last quarter of 2010 or from 5.83 per cent in the first quarter of last year.
However, the economy is still facing non-stop soaring CPI over the past three months. CPI hit 13.89 per cent in March, the highest year-on-year rate in 25 months.
Tuesday's hike in fuel prices, the second since February, up by 15.3 per cent, was predicted to contribute an additional 0.4 percentage point to April's inflation rate. This harmed the Government's effort to slow inflation.
The central bank's decision is expected to increase the cost of borrowing and will contribute to reining in credit and money growth and help bring down inflation expectations amid new challenges from rising global commodity prices.
As inflation pressure persisted, ANZ expected the central bank would hike its key interest rates further to 14-15 per cent this year to set a stage for more moderate growth next year.
Many bankers said that SBV's liquidity intervention via the Open Market Operation was more restrictive, which made inter-bank interest rates increase steadily and meet only 15-20 per cent of demand.
This week, the strong demand on dong loans pushed overnight interest rates on the interbank market to 13.5-16 per cent and one-week interest rates to 18-20 per cent annually.
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