February inflation at 16.44pct yr/yr
Vietnam's annual inflation rate this month slowed to 16.44 percent from 17.27 percent in January, though on a monthly basis consumer prices rose more quickly than last month, the government said.
February's annual rate continued a slowing in the pace of inflation since August, when it peaked at 23.02 percent.
Vietnam's consumer price index (CPI) this month rose 1.37 percent from January, when it increased 1 percent from December, the General Statistical Office said in its monthly report.
The government has said Vietnam's first priority in 2012 is to control inflation, with a targeted CPI rise of 9 percent, while aiming for economic growth of 6 percent.
Earlier this month, the government asked the State Bank of Vietnam (SBV) to study interest rate cuts in the first quarter. Some analysts said the fresh data showing that the annual inflation rate continues to decline could provide grounds for a rate cut in coming months.
Tai Hui, regional head of research at Standard Chartered Bank in Singapore, said: "We expect SBV to start cutting rates in months ahead due to the easing in inflation."
He said he expects inflation to be in single digits by late in the first half of this year. "Month-on-month inflation has been a touch higher than expected for the first two months of the year, but we expect this to cool in months ahead," he said. In December, State Bank of Vietnam Governor Nguyen Van Binh said banks would lower interest rates on their dong deposits to around 10 percent by the end of 2012, from 14 percent at present.
February's rise is "above our expectation" and is the first since last August when the monthly increase exceeded 1 percent, analyst Hai Pham from the Mekong Economics unit of ANZ Research said.
A festival-related surge in food prices, higher electricity tariffs and surging gas prices stood are behind the monthly rise, Pham said.
"Though inflation momentum is still falling, there is a risk that it will rise again next month," she said. "This leads us to maintain our view that the SBV may wait until after Q1 before starting to cut its policy rates, in order to anchor inflation expectations."
Tet, Vietnam's biggest festival to mark the Lunar New Year, has been a key factor influencing on Vietnam's consumer prices in the first two months of the year.
It was marked in January, contributing to raising monthly inflation then. In 2011, Tet came in February. In February 2011, Vietnam's annual inflation rate was 12.31 percent.
Reuters - February 24, 2012