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Vietnamese Inflation Slows for the First Time Since August 2010 DinarDailyUpdates?bg=330099&fg=FFFFFF&anim=1

Vietnamese Inflation Slows for the First Time Since August 2010

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Vietnamese Inflation Slows for the First Time Since August 2010 Empty Vietnamese Inflation Slows for the First Time Since August 2010

Post by lexie Sat Sep 24, 2011 1:18 pm

September 24, 2011

Vietnamese Inflation Slows for the First Time Since August 2010

Vietnamese inflation slowed for the first time in more than a year, bolstering the government’s scope to support economic growth by lowering borrowing costs.

Consumer prices climbed 22.42 percent in September from a year earlier, easing from a 23.02 percent pace in August, according to figures released by the General Statistics Office in Hanoi today. That’s the first deceleration since August 2010. Prices rose 0.82 percent in September from August.

Vietnam’s government said Aug. 25 the nation’s central bank will leave so-called policy interest rates unchanged for now and consider cutting them if inflation slows. Asian officials from the Philippines to South Korea and China have avoided monetary tightening in recent weeks as concern grows the world economy may be on the brink of another recession.

“Inflation is going to slow as base effects kick in,” Matt Hildebrandt, a Singapore-based economist at JPMorgan Chase & Co. (JPM), said before the release. “But with inflation expectations still not well-anchored and a potential power-price increase soon, the downward trajectory could be choppy.”

The benchmark VN Index of stocks fell 2 percent yesterday, while the dong weakened 0.1 percent to 20,832 per dollar, according to data compiled by Bloomberg. The currency was devalued for the fourth time in 15 months on Feb. 11.

State Bank of Vietnam Governor Nguyen Van Binh said last month that the central bank aims to lower dong lending rates at commercial institutions to a range of 17 percent to 19 percent starting from mid-September through to the end of 2011.

Policy Struggle

The government has struggled this year to contain price gains and support growth. Vietnam’s inflation rate remains the fastest in a basket of 17 Asian economies tracked by Bloomberg.

The State Bank of Vietnam has raised the repurchase, refinancing and discount rates to stem credit growth and slow price gains. It raised the repurchase rate in nine steps from 7 percent at the start of November last year to 15 percent in May 2011, before cutting it on July 4 to 14 percent.

While August may be the peak for Vietnamese inflation, “the real test has just begun” Santitarn Sathirathai, a Singapore-based analyst at Credit Suisse Group AG (CSGN), wrote in a note this month that said the dong may weaken if the government eases monetary policy too much.

Vietnamese inflation is a structural problem, driven by inefficient economic growth that lacks sufficient productivity, Asia Commercial Bank Chief Executive Ly Xuan Hai said Sept. 16.

“Inflation will come back again if we do not solve the main issues of our economy,” Hai said in an interview in his Ho Chi Minh City office. “In fighting with inflation over six months, twelve months -- we can fight, we can bring it down. But when growth comes back, if you will go by the old way, inflation will come back.”

The Vietnamese government should avoid reducing interest rates too soon because that may raise questions about the government’s commitment to fighting inflation, the International Monetary Fund told a Hanoi meeting this month attended by officials including Prime Minister Nguyen Tan Dung. (Bloomberg)


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