The decision of Vietnam’s central bank to raise both the refinancing and discount rates to 12% today (from 11% and 7% respectively) was in line with the recent top-level directive to get a grip on inflation. Indeed, the latest rate hikes should be seen as part of a suite of measures, including fiscal consolidation and banking sector reforms, designed to prevent further overheating. The improved coordination of policy on so many fronts should significantly improve the chances of success.
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