HANOI (Reuters) – Vietnam’s central bank announced on Thursday it will raise interest rates by 100 basis points in a rare move to tighten monetary policy with the aim of keeping inflation below 4 percent this year.
As of Friday, the refinancing rate will be raised to 5.0% and the discount rate to 3.5%, the State Bank of Vietnam (SBV) said in a statement on its website.
The move came on the heels of this week’s rate hike by the US Federal Reserve and similar steps taken by central banks across the region with rates rising across the world. Earlier on Thursday, the Vietnamese prime minister urged the central bank to reconsider its interest rate policy.
Kan Van Loc, an economist at Investment and Development Bank of Vietnam and a government advisor, said the rate hike “is in line with the global trend and is expected to help better control inflation in Vietnam.”
“I don’t think this will affect Vietnam’s official economic growth target of 6.0%-6.5% for this year,” Luc said. “GDP growth is expected to be 7.0%-7.5% this year.”
Vietnamese consumer prices in August rose 3.6% from the end of 2021. The government has targeted inflation at less than 4% this year.
The dong has fallen for nine consecutive sessions to 23,700 per dollar, the lowest since at least 1993, according to Refinitiv Eikon data.
The data showed that the daily reference rate set by the SBV stood at 23,316 dong to the dollar on Thursday, the weakest since at least 2005.
SBV Governor Nguyen Thi Hung said earlier on Thursday that Vietnam’s biggest economic challenge at present is keeping inflation under control.
The bank also said Thursday that it will raise the maximum interest rates on dong-denominated deposits from Friday, by 0.3-1.0 percentage points, depending on the maturities.