Cash injection not a concern for inflation: central bank

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The central bank's supply of money through open market operations in January, which helped improve the liquidity of commercial banks, will not fuel inflation, an official says.

A relatively large amount of cash was injected into the market before Tet, but the State Bank of Vietnam already began withdrawing the money after the holiday, when banks no longer faced liquidity problems, news website VnExpress reported Saturday, citing Nguyen Thi Hong, deputy director of the Monetary Policy Department at the central bank.

Hong said most of the cash flows provided by the central bank were short-term funds of seven or 14 days only. Although the amount was large, it would hardly have any impact on inflation, she said.

The State Bank of Vietnam pumped VND71 trillion (US$3.4 billion) into the market in the last two weeks before the Tet festival, which started on January 23, and has taken back VND57 trillion, according to the VnExpress report. That compares to a cash injection of VND132 trillion a year ago.

Vietnam's inflation slowed for a fifth month in January to 17.27 percent, after peaking at 23.02 percent in August. Prices rose 1 percent in January from December.

Even though inflation has eased, Hong said it will take some more time before a decision on interest rate cuts can be made.

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