Vietnam to hold base rate unchanged at 8 pct in May

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Vietnam's central bank said on Tuesday it would keep its benchmark base rate at 8 percent in May for a sixth consecutive month, after only a modest rise in consumer prices in April.

Annual inflation hit 9.23 percent this month, while the consumer price index rose just 0.14 percent from March, the General Statistics Office said last Friday.

A State Bank of Vietnam directive said the base rate will remain at 8 percent for May, unchanged since December 1, 2009 when the central bank raised it from 7 percent.

The base rate has become less influential on banks after the central bank freed up short-term lending rates earlier this month in a move to rationalize rates, following a similar move for medium- and long-term loans.

State Bank of Vietnam Governor Nguyen Van Giau told bank executives last week the central bank would use various tools to gradually lower interest rates, a separate statement from the central bank said.

Giau's comment followed a remark last Tuesday by Prime Minister Nguyen Tan Dung, who urged banks to lower their interest rates on dong deposits to around 10 percent and cut lending rates to 12-13 percent.

Banks in Vietnam have lowered deposit rates to comply with an industry-imposed cap of 11.5 percent over the past week, from nearly 12 percent earlier, and bankers said there were signs that lending rates were easing, too.

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