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| Vietnam raises interest rate in fight against inflation | Vietnam raises interest rate in fight against inflation |
| (about 2 hours later) | |
| Vietnam has lifted its main interest rate by two percentage points, but the country is still facing a tough fight to control inflation, analysts say. | |
| The central bank raised its main cost of borrowing by 200 basis points to 11% from 9% on Thursday. | The central bank raised its main cost of borrowing by 200 basis points to 11% from 9% on Thursday. |
| Earlier in the week, Vietnam had devalued its currency, the dong, by 8.5%, a move analysts said would fuel inflationary pressures. | Earlier in the week, Vietnam had devalued its currency, the dong, by 8.5%, a move analysts said would fuel inflationary pressures. |
| Vietnam's rate of inflation has accelerated to a 23-month high. | Vietnam's rate of inflation has accelerated to a 23-month high. |
| Analysts said the rate hike could help support the currency and curb inflation. | Analysts said the rate hike could help support the currency and curb inflation. |
| "The hike is essential, especially after the devaluation of the dong last week," ANZ Bank said. | |
| ANZ added that the interest rate increase on its own would not slow inflation enough for the State Bank of Vietnam to achieve its inflation target of 7% by the end of the 2011. | |
| "Therefore, we expect the authorities will have to raise rates again this year," it concluded. | "Therefore, we expect the authorities will have to raise rates again this year," it concluded. |
| Sacrifice Growth? | |
| However, there are concerns that continued interest rate increases may start to affect Vietnam's economic growth. | |
| Some analysts estimate that the country will have to reduce its economic growth target to between 5% and 6% this year. | |
| That is well below the 7% to 7.5% growth rate the government had earlier forecast. | |
| All three major ratings agencies downgraded Vietnam's credit rating last year because of economic concerns. | |
| They cited currency and inflation problems, as well as worries about the country's trade, budget and current account deficits. |