Surging inflation and liquidity problems in the banking system are the two most worrisome macro-economic risks that the Government needs to handle in the rest of the year, said the National Financial Supervisory Commission.

In a report, which was used as a reference at the recent Government meeting on the January-September economic performance, the commission called for prudence in management of prices of certain goods and services.

“No price hikes should be made in October to calm the market,” proposed the report.

Inflation in September jumped 2.2% against August, the highest in 16 months, breaking the rule of recent years, said the commission.

The report noted an uptrend of inflation was fueled by the strong need for power price revisions and unpredictable fuel prices.

Moreover, goods prices usually pick up in the final months. Food prices, livestock farming cost and diseases are factors that might affect the consumer price index (CPI).

In addition, some warning signs have emerged in the banking market, requiring close attention, said the report.

Deposit rates in early September tended to exceed the ceiling, implying that some banks were facing liquidity problems. Trading in the inter-bank market is slowing down as the volume in September declined 60%.

“This will force the central bank to have a more flexible policy in supporting the liquidity of the troubled banks, even if it is only temporary,” said the report.

Furthermore, local gold prices are volatile in line with the global market trend and due to the central bank’s ban on gold mobilization and lending at banks effective from November 25. However, there have been no specific policies for handling the issues related to gold after the ban comes into force.

The commission recommended that it is necessary to study the effects that may arise after November 25 when the banks stop lending and mobilizing gold.

The Saigon Times Daily