DBS Group Research economist Chua Han Teng expects the State Bank of Vietnam (SBV) to turn more hawkish as Vietnam’s inflation accelerates and stays above target. The bank now forecasts a 50 bps hike in the refinancing rate to 5.00% in 2026, potentially in 2Q26, and has raised its 2026 average headline inflation forecast to 4.8%.

DBS flags hawkish SBV policy risks

"Near-term price pressures will likely remain elevated, driven by high energy prices and broadening cost pass-through amid Vietnamese dong weakness."

"We are raising our 2026 average headline inflation forecast to 4.8% (from 3.8% previously), against this backdrop and average inflation of 4.0% in the first four months of the year."

"It is increasingly likely that policymakers will prioritise inflation-fighting credibility and lean towards a hawkish stance to curb price pressures and anchor inflation expectations."

"We have already identified Vietnam as being in the hawkish camp among regional central banks."

"Given these persistent dynamics, together with no clarity on the resolution of the Iran war and the reopening of the Strait of Hormuz, we now expect the State Bank of Vietnam (SBV) to hike its refinancing rate by 50bps to 5.00% in 2026, potentially as early as 2Q26."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)