Hanoi (VNA)𒆙 - ‘The overall inflation hikes much higher than the core inflation, mainly due to increased fuel and electricity prices. However, the core inflation inched up by only 1.85 percent in the first five months this year, proving that the monetary policy remains stable.

According to a report from the General Statistics Office (GSO), the consumer price index (CPI) in May increased by 0.49 percent month-on-month, by 1.5 percent from December 2018 and by 2.88 percent over the same period last year. Therefore, the index went up 2.74 percent in the first five months of this year, the lowest five-month figure in the last three years. Specifically, nine out of 11 groups of major consumer goods and services registered higher prices over the previous month. The transport group recorded the highest price increase of 2.64 percent; and housing, electricity and water supply, and construction materials up 1.28 percent. Education service prices hiked the least by 0.05 percent. Particularly, prices of medicines and medical services decreased by 0.06 percent, while post and telecommunications down 0.05 percent.

Macroeconomic stability

According to deputy head of the GSO’s Statistics Department Do Thi Ngoc, petrol prices went up according to the world trend while electricity prices also hiked due to growing consumption, plus the impacts of African swine fever. But the State Bank of Vietnam (SBV) still consistently follows a flexible monetary policy to maintain macro-economic stability goal. Ngoc cited a number of factors that influenced the CPI's rise in the month, including the long holiday season (April 30 and May 1) with stronger demand for dining and tourism, leading to higher prices for many items compared to the previous month. Another highlight was the adjustment of petrol prices, up on May 2 and down on May 17, raising the price of A95 petrol by 360 VND per litre, E5 petrol by 780 VND per litre and diesel up by 230 VND per litre, so that the average petrol price inched up by 5.93 percent month-on-month and pushed CPI by 0.25 percent. Additionally, higher electricity prices in March and hot weather conditions fueled the demand for electricity and water consumption. Electricity and water prices went up 6.86 percent and 1.17 percent, respectively. An increase of 0.6 percent in gas price, price of materials for housing maintenance up 0.66 percent, and higher price of textbooks for 2019 - 2020 school year also pushed CPI up during the month.

Mixed fluctuations in gold and exchange rates

Ngoc analysed that the prolonging trade tension between the US and China has appreciated the value of the US dollar, specifically the average index of this currency (as of May 24) surged to 97.5 percent and about 5 percent compared to the April average. Accordingly, the exchange rate between VND and USD rose relatively high. However, due to abundant foreign exchange reserves and the effectiveness of exchange rate management under the SBV’s central rate exchange mechanism with eight key currencies, the VND /USD exchange rate was not affected and recorded a monthly rise of 0.45 percent.  The US dollar price in the free market hovered around 23,351 VND. On the contrary, the world gold price dropped due to the pressure from rising USD and investors’ confidence that the US Federal Reserve (FED) will not cut basic interest rates this year. But in recent days, instability in the international financial market has supported the recovery of gold prices, so the average world gold price as of May 24 decreased slightly by 0.09 percent compared to April. In the domestic market, the gold price also fluctuated according to the international trend, going down 0.5 percent over the previous month to around 33.66 million VND per tael. With such movements, the GSO's report pointed out that the core inflation (CPI exclusive of foodstuff, fresh food, energy and State-controlled items, including health and educational services) rose by 0.13 percent in May over the previous month and 1.9 percent annually. The five-month figure was 1.85 percent year-on-year./.