The refinancing rate will also be maintained at 7 percent and compulsory reserves, or the amount of money that banks need to set aside to cover deposits, will be kept at 6 percent for foreign- currency and 3 percent for dong, Wednesday’s statement said. These rates will be held “for the rest of the year and in early next year,” it said, not giving a more specific timeframe.

The central bank will probably raise its benchmark interest rate to 10 percent by June to tame inflation, Barclays Plc predicted.

Vietnamese consumer prices climbed 2.99 percent in October from a year earlier, accelerating for a second straight month. The threat to the economy of faster inflation will soon outweigh that of sluggish growth, wrote Prakriti Sofat, an economist at Barclays Capital Research in Singapore.

“The prospect of rising inflation is raising concerns both onshore and offshore, given fresh memories from last year,” Sofat wrote in a note dated October 23. Inflation surged in August 2008 to 28.3 percent, the highest level since at least 1992.

Inflation may accelerate to as much as 7 percent by year-end, Sofat wrote.

“Inflation is going to continue grinding higher, given commodity price effects: food and oil,” she said. “At the same time, domestic demand remains fairly robust, with retail sales growing at 20 percent or so, and overall credit has grown by roughly 25 percent from levels at the end of 2008.”

Vietnam will probably raise its benchmark rate by the most in Asia next year, HSBC Holdings Plc said this month, predicting an increase to 11 percent by the end of 2010.

Source: Bloomberg