Monetary policy in 2023 should respond more carefully to inflation, Mr. Pham Chi Quang, Head of the Currency Policy Department at the State Bank of Vietnam (SBV), told the Vietnam Economic Scenario Forum 2023, co-organized by VnEconomy / Vietnam Economic Times and the Ministry of Foreign Affairs in Hanoi on January 11.

The SBV will act under the motto of controlling inflation with flexible management, he said.

At the end of 2021 and the beginning of 2022, most policymakers considered inflation to only be a momentary matter, Mr. Quang explained. However, inflation has reached its highest level for 40 years.

With such misunderstandings, central banks must change their monetary policies, from easing policies to tightening policies, to curb inflation. The US Federal Reserve, in fact, increased interest rates four times, by 0.75 percentage points each time, citing the need for a rapid process to curb inflation.

As a result, global interest rates were pushed quite high, causing the USD to surge to its highest level in 20 years. In 2021 alone, the US Dollar Index (DXY) grew in strength by 21 per cent, which put great pressure on monetary policies in not only Vietnam but in all emerging countries.

“In that context, Vietnam’s monetary policy faced many difficulties,” Mr. Quang said. “With the economy opening widely, withstanding such shocks will be stressful.”

Entering 2023, the overall goal of monetary policy management is to maintain the stability of cash flows and control inflation. From that goal, the SBV will achieve its target of maintaining healthy and stable operations in the banking industry, according to Mr. Quang.