Tiêu điểm ngày 03/07/2008: Vietnam may cut base rate in August

Tiêu điểm ngày 03/07/2008: Vietnam may cut base rate in August

Vietnam''''s central bank could cut its base rate, used by banks to set deposit and lending rates, from August, when inflation is expected to be under control, a local newspaper reported Wednesday.

"The state will manage interest rates on a stable trend; at least in July (it) will not adjust the base rate but it could adjust the rate down in August," Ho Huu Hanh, director of the State Bank of Vietnam''''s (SBV) Ho Chi Minh City branch, was quoted as saying by the Liberation Saigon daily.

The rate cut could come "because inflation is forecast to be contained", Hanh was quoted by the newspaper as telling Vietnamese reporters at a briefing on Tuesday.

Foreign media were not invited to the briefing.

The State Bank of Vietnam raised its base rate to 14 percent in June from 12 percent, its third rate hike this year, as it sought to contain inflation, which hit 26.8 percent in June.

The consumer price index (CPI) rose 2.14 percent in June from May, smaller than the 3.9 percent increase in May from April, the government said.

Matt Hildebrandt, economic and credit researcher at JP Morgan Chase & Co in Singapore, said monthly changes in the CPI in July and August would need to be a lot lower than that 2.14 percent in June for him "to feel very confident in lowering rates".

"August might be a little too soon and we would feel more comfortable if they did it later in the year," Hildebrandt said.

Tai Hui, an economist at Standard Chartered Bank in Singapore, said in an email it was premature to talk of a rate cut because annual inflation was expected to rise for months ahead.

"The latest growth data suggests the economy is slowing and high rates could place stress on the banking sector for the rest of the year, but it would be imprudent for the SBV to cut now until inflation is proved to be truly beaten," he said.

"A cut now will undermine the little hard-earned credibility that the SBV has achieved in recent months."

On Tuesday, Asian Development Bank President Haruhiko Kuroda told reporters at an emerging markets forum that Vietnam''''s fiscal and monetary tightening measures to control inflation had been appropriate.

"We are confident that inflation can be overcome in coming months," Kuroda said.

Finance Minister Vu Van Ninh said in late June that the government expected inflation to ease to single-digit levels from 2009.