Russia and Vietnam Get Tighter Monetary Policies

April 29, 2011

Russia and Vietnam have been coping with very elevated inflation even by the standards of mounting commodity-fueled price pressures found in most countries these day.  Today, the State Bank of Vietnam lifted its seven-day refinancing rate to 14% from 13%, the fourth hike of a percentage point so far this year.  Vietnam’s discount rate also increases 100 basis points and will become 13%.  Bank Rossii cited a rise in Russia’s expected rate of inflation for justifying a second advance of its refinancing rate, which like the first one on February 25 was a move of 25 basis points.  That rate becomes 8.25%.  Unlike in February, reserve requirements were not also increased in Russia. 

Neither central bank seems to be through with monetary tightening.  CPI inflation is at17.5% in Vietnam and at 9.6% against a target of 7% in Russia.  Vietnamese GDP has been expanding more rapidly than 5% annuallized, and Russian growth is expected to run around 4.5%.  Russian officials have become more predisposed to permitting the rouble to appreciate, which it has been doing against the backdrop of escalating energy export revenues.  The Vietnamese dong, by contrast, has been depreciating since late 2009.  Supporting their exchange rate and reducing credit growth, which presently exceeds 20%, are two specific hopes that Vietnamese monetary authorities seek to achieve by tightening their policy stance.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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