Adjusting the exchange rate can lead to the risk of not keeping the target inflation

	Banks increase the trading price of US$
	Being active with the "wave" of exchange rates
	Will the total rate of retail sales achieve over 4,200 trillion VND?

Dr. Nguyen Minh Phong.

The exchange rate has tended to increase sharply recently, causing a great pressure on inflation. How do you assess this issue, Sir?

The exchange rates have a twofold impact on domestic economic life. On the positive side, domestic exporters are more competitive in the market, even with more business contracts. This is also a positive side to note in the exchange rate administration.

The downside is that it raises the price of imports. In the context of domestic inflation being resonant with many factors, if we continue to adjust the exchange rate, it may create both monetary pressure and psychological pressure as well as many other factors. The inflation may be higher than the 4% - the target which the National Assembly set out.

Recently, the State Bank of Vietnam announced that Vietnam had a large amount of foreign exchange reserves and committed to be ready to "launch" the US dollars to stabilize the exchange rate. How do you rate this move?

We have had good foreign exchange reserves. Foreign exchange reserves increased because the State Bank continuously bought tens of billions of US dollars, and at the same time had solutions to neutralize the amount of money. However, as I said, the delay of monetary policy will put a pressure on inflation.

On the positive side, an increase in foreign exchange reserves is good but the downside is the pressure on inflation. Thus, as inflation accelerates, it will have an immediate impact on the lives of people, and therefore may even affect the use of foreign exchange reserves to maintain exchange rate stability, as well as meeting foreign demand units and individuals.

The exchange rate will affect the price from now until the end of the year or not, Sir?

Certainly the exchange rate increase will affect inflation. As the exchange rate rises, we have to spend more money to buy each US dollar and thus will affect commodities. Although the goods are not directly affected, the psychological experience shows that it also creates the spread, so it will affect the general price level in the country. That is not to mention businesses have to borrow at a higher interest rate, causing a fall in the growth engine, affecting the goals of macro growth.

What should the regulators do to avoid the undue impact of inflation which affects the targets for macroeconomic growth and inflation?

Admittedly, in the first months of 2018, overall economy of the country continued to grow steadily. Inflation was controlled. Monetary policy was active and flexible. The interest rate was stable, favourable for production and business. The exchange rates, foreign exchange market and State foreign exchange reserves reached $US 63.5 billion. This is the premise for Vietnam to continue to achieve the objectives of macroeconomic growth and inflation control set out in 2018.

However, from now until the end of 2018, there are still many challenges that require policies to be put into practice and especially in the implementation of fiscal and monetary policy. I think it is necessary to closely coordinate fiscal policy with monetary policy, aiming to stabilize the macro-economy to continue to restructure State budget revenues and expenditures as well as promote the thrift practice and combat wastefulness.

It needs to pay attention as the exchange rate ripples VCN- In the first 5 months of 2018, the exchange rate has had small "wave" many times ...

At the same time, the Government must drastically restructure credit institutions associated with dealing with bad debts and weak credit institutions. Strive to reduce the lending interest rate; expanding credit scale in parallel with improving credit quality, ensuring capital supply for the economy, creating favourable conditions for enterprises to access bank capital.

Thank you Sir!