Vietnam\'s central bank said on Thursday it would raise the refinance rate, one of its policy rates, by 100 basis points to 15 percent on October 10.
 |
| Vietnam has been struggling to tame the region\'s fastest rising consumer prices. Photo: Tuoi Tre |
Two other key rates – the discount rate and the reverse repurchase rate for open market operations – were left unchanged at 13 percent and 14 percent respectively. It said the overnight rate for electronic interbank transactions would go to 16 percent from 14 percent.
Vietnam has been struggling to tame the region\'s fastest rising consumer prices. Annual inflation eased to 22.4 percent in September from 23.1 percent the previous month and some economists warn that the problem is far from over.
The rate decision also comes at a time when the dong is under renewed depreciation pressure.
Thursday\'s move represented the fifth increase in the refinance rate since February, when it began the cycle at 9 percent. The discount rate has been increased twice since March, while the OMO rate has been doubled since last November.
The last refinance rate hike was on May 11.
The decision to adjust rates on Thursday was taken "to enhance the effectiveness of adjustments to monetary policy and regulate market interest rates", the State Bank of Vietnam said on its website.
The move would make refinancing activities more expensive, theoretically reducing the amount of lending the central bank does via that window and prompting banks to seek other sources of funds.
The central bank also on Thursday made it less lucrative for commercial banks to keep excess foreign exchange deposited at the State Bank or with the State Treasury by halving the rate it pays to 0.05 percent from 0.1 percent.
The State Bank of Vietnam uses a complex mix of traditional policy levers and administrative decrees to manage monetary conditions and banking activities.
Recently, it convinced major banks to lower commercial lending rates to 17-19 percent from more than 20 percent in some cases in a bid to ease the pain on corporates of months of tight monetary conditions.
It also in July lowered the reverse repo rate to 14 percent from 15 percent in a move that confounded some economists but that the SBV insisted did not amount to policy easing. Traders later said the move was likely a step to catch up with market interbank rates that had come down.
