The consumer price index jumped by 2.22 per cent in June and 4.6 per cent from a year earlier, a seven-year high, the General Statistics Office (GSO) reported. — Photo thoibaonganhang.vn The rest of this year is likely to be a difficult period for the economy meaning challenges for the Government in achieving the targets set for the year. The problems include a weakening of the dong against the dollar and rising inflation, interest rates and public debt, and the Government will be walking a tightrope in terms of monetary policy. The consumer price index jumped by 2.22 per cent in June and 4.6 per cent from a year earlier, a seven-year high, the General Statistics Office (GSO) reported. Inflation in the first six months of the year was up to 3.29 per cent. GSO experts attributed the sharp increase in inflation in recent months to the rise in prices of several major products and services. Of 11 major categories of goods and services, nine saw prices increasing. Transportation … [Read more...] about Trillion đồng question: to tighten monetary policy or not?
Limitation of monetary policy
The State Bank of Vietnam has been taking action to tighten monetary policy, but the moves have not helped much: prices continue soaring. Reporters interviewed with the head of the Price Control Department under the Ministry of Finance Nguyen Tien Thoa, about comprehensive measures to be taken at the same time. Reporter: What are the main reasons behind the high inflation rate in the first two months of the year? Mr. Nguyen Tien Thoa: I think there are two main factors which have directly led to the high price increases. The first is that the volume of cash in circulation and credit volume have increased considerably, exceeding commodity supplies. The second is the higher prices of food and foodstuff, and main consumer products. Reporter: Do you mean that the main reason behind the price increases is the commodity shortage? Mr. Nguyen Tien Thoa: No, it is not the only reason. There are a lot of factors that push the inflation rate up: foreign investment capital keeps increasing while … [Read more...] about Monetary policy alone cannot restrain inflation
HANOI - Several drawbacks of the current monetary policy are stated in a report of the National Assembly's Economic Committee, which stresses that the ultimate target of the policy was ambiguous. First of all, the monetary management policy was aimed at too many goals, with some of them conflicting with each other. For example, if containing inflation was chosen as a priority, economic growth must be sacrificed, according to the report obtained by the Daily. Failing to identify its main target, the policy was sometimes left in passive position and had slow response to the market changes. Also, the mechanism in conveying the effects of the monetary policy was not clearly defined. At present, the central bank has yet to have quantitative analysis of the impact of the changes in money supply on the ultimate goal of monetary policy, as well as on the credit, interest and forex rates. Clearly identifying the mechanism is crucial in monetary management to achieve the desired goal, … [Read more...] about NA pinpoints drawbacks of monetary policy
If the State Bank of Vietnam keeps tightening the monetary policies, this would lead to the sharp fall of the productivity, which may make the high inflation return, economists have warned. Vietnam's economy has shown signs of recovery in recent months with the inflation rate decreasing to 0.36 percent in October and 0.35 percent in November. The interest rates tend to decrease, while the payment balance witnesses the surplus of 3.5-4 billion dollars, and the foreign currency reserves have increased to 14 billion dollars. Economists say that they can see some problems in the monetary policies and that it is now the right time to loosen the monetary policies. Credit limits unreasonable The worsening situation of the world's economy has had negative impacts on the Vietnamese economy. Meanwhile, the exchange rate has been under a hard pressure caused by the hot foreign currency credit growth. The dollar price may rise one day, when the supply becomes short as businesses rush to … [Read more...] about Economists urge to loosen monetary policies
Expectations Of Fiscal And Monetary Policies By Tu Giang Fiscal constraints make it difficult for those mapping out monetary policies to drag interest rates down by 3-4 percentage points Since the Ministry of Finance and the State Bank of Vietnam jointly developed a framework for fiscal and monetary policy coordination, some have hoped that the move will phase out obstacles to macroeconomic stabilization in the country Nguyen Van Binh, governor of the State Bank of Vietnam (SBV), has been under immense pressure to lower interest rates to help struggling enterprises, especially as inflation has been arguably under control. He has opted for a cautious rate cut to lessen enterprises’ suffering while still guarding against a surge in prices. Unfortunately, SBV’s effort may not work wonders immediately. Cao Viet Sinh, deputy minister of planning and investment, who has contributed to most of Vietnam’s macroeconomic reports, is well aware of the crushing interest rates … [Read more...] about Expectations Of Fiscal And Monetary Policies