[NEWS] – Proactive, flexible, synchronized monetary policy in 2023

In 2023, the State Bank (SBV) will continue to actively, flexibly, and synchronously operate monetary policy tools to control inflation; contribute to macro stability, and support economic recovery...

2022 is the first year the economy is recovering from the Covid-19 pandemic but it faces many unprecedented difficulties and challenges, including the escalating Russia-Ukraine conflict, commodity prices, and high inflation. ... The trend of tightening monetary policy will be strongly promoted by central banks (central banks) in 2022. The extent and frequency of interest rate hikes are implemented by the US Federal Reserve (Fed). The fastest rate in history with 7 consecutive upward adjustments in 2022 from 0-0.25%/year to 4.25-4.5%/year.In this trend, many central banks in the country developed and developing countries had to increase interest rates sharply and sell foreign currencies to intervene in the market to protect the value of the local currency and control inflation.

Import inflation increases production costs, putting pressure on domestic inflation; Therefore, although the average inflation in 2022 is controlled below 4%, core inflation increased rapidly, suddenly from 0.66% in January 2022 compared to the same period in 2021 to above 5% in December/December. 2022, showing a huge challenge in controlling inflation in 2023. In that context, monetary policy management must balance intertwined tasks and goals, even at times of conflict in controlling inflation. development, stabilizing the macro-economy, supporting economic recovery, stabilizing the money and foreign exchange markets, ensuring the safety of the system of credit institutions, maintaining investor confidence and people, improving flexibility, and creating policy space to increase the ability to absorb shocks from the outside.

Positive contributions to the economy

Facing rapid and unpredictable fluctuations of domestic and international markets, following the demand of the Party, National Assembly, Government, and Prime Minister, the State Bank flexibly operated monetary policy, closely coordinated with policies. fiscal and other macro policies to control inflation, stabilize the macro-economy, support the recovery of economic growth, and promptly adapt to market developments. Accordingly, monetary policy management tools and solutions are coordinated, proactive, and flexible to stabilize the currency and foreign exchange markets, especially in stressful liquidity and nervous market sentiment. concerned after the incident at SCB in October; thereby minimizing adverse shocks affecting interest rates and exchange rates; ensuring the supply of capital to support economic recovery; well implement the inflation control target; ensure the safe operation of the system of credit institutions.

In the context of unpredictable world economic fluctuations, in the first 9 months of the year, the State Bank closely followed market movements at home and abroad to synchronously administer monetary policy tools and solutions to contribute to controlling average inflation in Vietnam. low level (2.73%), supporting economic growth to recover positively (GDP increased by 8.83%), the money market, and foreign exchange were stable, and VND depreciated at a low level (4.8%). %) against currencies of many countries (from 6%-33%), VND interest rates increased slightly (about 0.3-0.4%) while interest rates in many countries increased sharply. The liquidity of the credit institution system is stable and smooth, fully meeting the payment needs of businesses and people.

In October 2022, the currency and foreign exchange markets were under pressure due to the dramatic increase in the exchange rate, poor market liquidity, and increased foreign currency hoarding. To relieve market pressure, the SBV had to simultaneously implement urgent solutions such as: increasing the trading band of the exchange rate and allowing the VND to fluctuate more flexibly as mentioned above; willing to sell foreign currency intervention; 1% increase in operating interest rates; support liquidity and ensure the safety of the system of credit institutions.

Solutions for operating monetary policy in 2023

In the coming time, in the context that the global economy continues to have many unfavorable and unpredictable factors, central banks will continue to tighten monetary policy and raise interest rates to continue controlling inflation. Although domestic inflation is currently under control, however, pressure will continue to increase in 2023, especially core inflation which may create many challenges for inflation control in 2023. comes from both the supply side (cost-push) and the demand side (demand-pull).

On the supply side, the second round impact from the high world commodity prices in the years 2020-2022 will continue to be reflected in production costs (import inflation) and thereby affect the consumption costs of other products. domestic goods. On the demand side, it is expected that the domestic economy will continue to recover, thereby promoting the recovery and rapidly increasing aggregate demand of the economy, putting pressure on prices.

Currently, the economy’s medium and long-term investment capital depends mainly on the banking system, while the capital mobilization of banks is mainly short-term, so the system of credit institutions faces liquidity risks. , term risk. To ensure capital for economic development, it is necessary to develop capital markets safely and sustainably such as the corporate bond market and the stock market. solutions to overcome the current inadequacies in these markets.

Source: Collector