The Hanoitimes – HSBC expected the SBV to react proactively, hiking its policy rate moderately by 25 basic points in the third quarter this year to curb inflationary pressures and inflation expectations. Vietnam’s headline inflation rose 4.5% year-on-year in July, remaining well-above the State Bank of Vietnam (SBV)’s 4% target, which is expected to remain above the target for the remainder of the year and well into next year, stated HSBC. Illustrative photo. This is unless the government imposes additional measures to curb prices that may, eventually, hurt its budget, said HSBC in its latest research sent to Hanoitimes. The downside risks to inflation in Vietnam are if the government continues to roll back its reforms to liberalize healthcare costs and/or imposes additional subsidies to certain goods and services, both of which may lead to a wider government budget deficit and, ultimately, higher public debt. However, HSBC believed this would be counter-productive, given recent positive developments on the fiscal front and potentially bad repercussions if the government were to breach its public debt- to-GDP limit of 65%. HSBC expected the SBV to react proactively, hiking its policy rate moderately by 25 basic points sometime in the third quarter to curb inflationary pressures and inflation expectations. The research pointed to just one hike is an acknowledgement that the government is concurrently implementing administrative controls to curb inflation, while the SBV also wants to ensure that credit growth does not fall significantly below its current 17% year-on-year growth target. HSBC believed… [Read full story]
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