Diesel prices were reduced to 20,400 dong (98 cents) from 20,800 dong per litre, and kerosene prices were cut to 20,200 dong from 20,500 per litre, the Ministry of Finance said in a statement on its website. The reductions took effect at 11 a.m. local time on October 10, according to the statement.

"The cuts will help ease inflationary pressure, as it will reduce transportation and production costs that contribute to easing food and goods prices," said HCM City-based Nguyen Duy Phong, an analyst at ACB Securities Inc. Diesel is commonly used by transportation companies, while kerosense is mainly used in factories and households, Phong said.

Vietnam's government has struggled to restore confidence hurt by inflation that has exceeded 20 percent this year. The central bank said last week it would increase its refinancing rate to 15 percent from 14 percent, effective on October 10. The World Bank in June described price gains in Vietnam as "intolerable" and called on policy makers to maintain tight monetary conditions until inflation is below 10 percent.

Prices of 92-RON gasoline, the most commonly used fuel grade in Vietnam, remained unchanged at 20,800 dong a litre, the ministry said in the statement. Its move follows China, which yesterday cut fuel prices for the first time this year. Vietnam in August cut prices of fuel products by as much as 2.3 percent.

Consumer prices increased 22 percent in September from a year earlier. Vietnam's inflation rate remained the fastest in a basket of 17 Asian Pacific economies tracked by Bloomberg.

Bloomberg - October 12, 2011