Vietnam Raises Interest Rates for First Time in Almost a Year

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Nov. 10 – Vietnam’s central bank will raise interest rates on Friday for the first time since December 1, 2009 after inflation increased to a 19-month high in October.

According to the State Bank of Vietnam, the nation’s refinancing rate will increase from 8 percent to 9 percent and the discount rate will rise from 6 percent to 7 percent.

“The government needed to address concerns that monetary policy was not dealing decisively enough with high inflation and the pressures on the dong,” said Benedict Bingham, a Hanoi-based representative for the IMF in Vietnam.

The interest rate increase is “a good first step, but further adjustments in policy rates may still be needed,” he said.

Vietnam’s inflation rate stayed above 8 percent for ninth straight month in October, increasing to a high of 9.66 percent – exceeding the government’s annual target and triggering the central bank’s interest rate hike.

The country is unlikely to meet its inflationary target and the dong will probably be devalued again in the first quarter of 2011, according to Kevin Grice, an economist at Capital Economics in London.