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Saturday, June 22, 2024

Differences in money supply

By Le Hoai An

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The credit growth target which the State Bank of Vietnam (SBV) has set for this year is 15%. There has emerged concern over the risk of inflation resulting from rapid money supply growth. In the United States and other developed countries, money supply spikes three years ago were the source of runaway inflation. However, there are differences in the way money supply is managed between the U.S. and Vietnam, which need to be taken into consideration. About VND2 quadrillion, or 14.8% of the VND13.5 quadrillion deposited into the banking system in 2023, is expected to be injected into the economy through lending in 2024. Credit growth and money supply growth are closely correlated in the Vietnamese market. The term “money injection” has become increasingly common in Vietnam, especially since the U.S. Federal Reserve (Fed) continuously pumped money into the U.S. economy through quantitative easing packages. However, the monetary policy of the SBV in Vietnam contains many differences compared to the Fed’s operation in the U.S. Money injection potentially causes inflation. The term is also used in Vietnam when the money supply increases sharply. The first thing to note is that the Fed operates its monetary policy through the federal funds […]
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