Vietnam May CPI jumps 19.8%, highest since December 2008

Monthly inflation in Vietnam eased to 2.2 percent in May from 3.3 percent last month, the government reported on Tuesday, but further monetary tightening may still be in store as the authorities try to ease price pressures.

The consumer price index (CPI) rose 19.8 percent in May from the same month last year, up from 17.5 percent in April and the highest since December 2008, when inflation stood at 19.9 percent after peaking at over 28 percent earlier that year.

The government and central bank have responded to some of the world’s fastest rising prices with a string of measures since February, including several increases in policy rates, lower credit growth goals and commitments to rein in spending.

The May figure was within government expectations but some economists believe another rate rise may lie ahead.

“Inflationary pressures clearly still remain at the fore, which will keep the pressure on the State Bank of Vietnam. We are likely to see another hike in the policy rate in the coming weeks,” said Prakriti Sofat at Barclays Capital in Singapore.

Rising prices, which economists started to warn about last year but did not elicit a policy response until February, have caused ripples in the country of 87 million people.

The Ho Chi Minh Exchange [.VNI 486.58 6.50 (+1.35%) ] sank to a two-year low on Tuesday and the Hanoi Exchange has continued a steep decline since breaking below an all-time low on Friday.

Brokers have blamed the declines on margin call pressure as banks scramble to lower their ratio of loans to “non-productive” sectors, including equities, as required by the central bank.

The United Nations warned on May 10 that high inflation would push more Vietnamese into poverty.

Last Wednesday, the state-run Vietnam News daily quoted a labor official as saying the number of strikes in the first three months of the year had already exceeded the total for all of last year because of inflation.- Reuters

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