Vietnam’s central bank raises interest rates by 1%

Vietnam’s central bank yesterday raised its key interest rate by 1%, the second rate hike in a month, to curb inflation risk and maintain banking system stability.

The rate hike will take effect today (October 25), raising the refinancing rate to 6% and the reference rate to 4.5%.

In addition, the bank said it will closely monitor internal as well as external markets and be ready to use financial measures and instruments if necessary. It will also intervene in the currency and financial markets to ensure that financial institutions have sufficient liquidity.

Earlier, the Vietnamese central bank devalued the dong on October 17, raising the exchange rate from 3.0% to 5.0%, while the dong fell sharply amid volatility in the foreign exchange market.

Analysts believe that the Vietnamese central bank has sold about $20 billion worth of foreign currency this year to support the dong.

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