Vietnam’s central bank will be “very cautious” with regard to additional
cuts in interest rates because it may increase inflation and currency
instability.
The monetary regulator doesn’t
expect to lower the dong deposit rate further, as it may prompt depositors to
switch from dong to dollars and gold, and fuel inflation, Central Bank Governor
Nguyen Van Binh said during a National Assembly meeting broadcast live on state
television today. The central bank has cut its key refinance rate five times
this year.
“We did the right thing in
lowering interest rates so far this year,” Binh said, responding to questions
from lawmakers. “We would be very cautious in cutting rates further.”
Vietnam is struggling to boost a
slowing economy while trying to control an inflation rate that was once the
fastest in Southeast Asia. The central bank has cut interest rates and approved
expanded credit at banks to help businesses and spur economic growth. The
central bank is aiming for credit growth of 8 percent this year, Binh said
today.
Deputy Prime Minister Vu Van Ninh
has said the country may miss its 6 percent growth target after the economy
grew by 4.7 percent in the three months to June from a year earlier. Consumer
prices may rise in August from July because of higher power and fuel costs, the
Ministry of Finance said on Aug. 15.
Annual inflation may accelerate
to between 6 percent and 7 percent at the end of this year, Binh said. Economic
growth may slow to as low as 5.1 percent, Nguyen Duc Kien, deputy head of the
National Assembly’s economic committee, said in an interview in Hanoi
yesterday.
Bloomberg
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