Vietnam’s central bank (SBV) lifted its policy rate by 100bp, to 9%, late on Friday. The adjustment is a step in the right direction but far more has to be done to ensure that inflation slows to the regional average. Fiscal consolidation needs to be more aggressive and additional interest rate hikes should be expected in 2011. The currency will also probably slip further against the US dollar, although it is now more likely that a disorderly and large move can be avoided.
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