Vietnam's central bank expects inflation for 2007 to be between 7% and 7.5%, governor Le Duc Thuy said on state-run Voice of Vietnam radio on Thursday, higher than earlier government projections.
"There are signs showing the consumer prices are rising high," Thuy said on a radio broadcast. "We needed to look back at our inflation estimates made early this year and now to give a figure. It's forecast at 7% to 7.5%."
Vietnam's consumer price inflation in May accelerated to 7.31% from a year earlier on higher fuel and food costs, up from 7.16% in April, government figures showed.
The rise is above a government target to keep full-year inflation at less than 7% while it strives for economic growth of 8.5% this year, after an expansion of 8.17% in 2006.
Raising the reserve ratios banks must keep at the central bank would be one of the measures to help cap the price rise, Thuy said in the broadcast, a day before a central bank ruling forcing banks to keep more reserves comes into effect.
From Friday, banks must keep reserves of 10% on dong deposits with terms of up to 12 months, from 5% earlier. The reserve level for dong deposits of between 12 months and 24 months will also be doubled to 4%, a central bank directive has said.
Deputy Governor Nguyen Dong Tien who signed the directive also raised reserves against banks' foreign currency deposits of less than 12 months to 10% from 8%.
The new requirement for reserves on foreign currency deposits of between 12 months and 24 months will be doubled to 4%.
"Doing so would affect the working capital of banks which could lead to a higher cost of loans, but at present usable funds are ample so raising the compulsory reserves will not have an impact on interests," governor Thuy said on the radio.
Source: Reuters
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