Finding the right balance in monetary policy.

Monetary policy must balance multiple objectives: supporting growth while containing inflation, stabilizing the exchange rate, ensuring market liquidity and maintaining the soundness of the financial system. Globally, the shift away from prolonged monetary easing is advancing, and the stance of major central banks is becoming increasingly cautious.

The European Central Bank raised its 3 key policy rates by 25 basis points on 10 September. The ECB indicated that turmoil in the Middle East was preventing inflation from being brought under control and that inflation would remain above target for an extended period. It forecast an average inflation rate of 3% across Europe in 2026.

The Federal Reserve raised the federal funds rate by 0.25 percentage points on 16 September, setting the target range at 3.75%–4.00%. The Fed expects inflation to remain elevated, and the move was viewed as aimed at bringing inflation back to 2%.

The Bank of Japan raised its policy rate to approximately 1.25% on 18 September and indicated that it would maintain the uncollateralized overnight call rate at that level. This marks a move toward greater alignment in the direction of monetary policy among the major advanced economies.

Vietnam’s inflation trends show that the CPI rose 4.89% year on year and 0.47% month on month in August 2026. The CPI rose 4.45% on average over the first 8 months, while core inflation increased 4.24%. Inflows of foreign direct investment rose 12% year on year, and the manufacturing PMI reached 53.3 points.

Experts have pointed out that the Fed’s rate hike was in line with market expectations, while expressing the view that the impact of persistently high interest rates on Vietnam will be limited. Some have called for a greater role for fiscal policy in supporting growth by accelerating public investment and developing the capital markets.