Vietnam inflation slows a third month on food prices

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Vietnamese inflation slowed for a third month in June as food prices eased, giving the government room to keep prodding banks to reduce borrowing costs.

Consumer prices rose 8.69 percent from a year earlier, after inflation exceeded 9 percent in each of the previous three months, according to figures from the General Statistics Office in Hanoi Thursday. Prices advanced 0.22 percent in June from May.

State Bank of Vietnam Deputy Governor Nguyen Van Binh said this month that the central bank would try to lower borrowing costs at the government's request as interest rates are still "high" and cutting into corporate profits. The government is targeting 6.5 percent economic growth this year, up from 5.3 percent in 2009.

"The government must be relieved that inflation seems to be coming under control," said Ayumi Konishi, the Hanoi-based Vietnam country director for the Asian Development Bank. "Food prices have been coming down and the relatively stable foreign-exchange environment must also be contributing to this."

Vietnam's currency is trading at 18,980 per dollar, having strengthened from 18,990 at the end of May.

Focus on stability

"It's too early to say" whether the latest inflation figures suggest that interest rates can drop significantly, Konishi said. "The government has repeatedly said that economic stability is the most important thing."

Prices in the category including rice dropped 0.83 percent from a month earlier, according to the data. Export prices of some varieties of Vietnamese rice declined as much as 6 percent in the week ended June 11 from a week earlier, the agricultural attaché's office at the US Embassy in Hanoi said in a report released on June 18.

Prices fell "because exporters' buyers delayed purchasing rice in anticipation of the autumn harvest reaching its peak in mid-July," the US agricultural attaché's office said in the report. "Paddy prices were slightly down last week due to the autumn harvest having begun last week."

Transportation prices rose 14.82 percent in June from a year ago, down from an 18.16 percent annual pace in May. On a monthly basis, transportation prices dropped 0.71 percent in June from May.

"For a lot of countries, headline inflation is virtually tracking commodity prices, which have become more stable," said Matt Robinson, a Sydney-based economist for Moody's Analytics Inc. "Crude oil is not providing inflation pressure right now."

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