The central bank in Vietnam has announced it will hike its policy rates by 100 basis points (bps), the second rise in a month, in a bid to curb soaring inflation and boost stability.

Coming into effect on Tuesday, the refinancing rate will rise to 6.0% and the discount rate to 4.5%, according to a State Bank of Vietnam (SBV) statement.

Vietnam has been challenged with rising inflationary pressures and the currency, the Dong, has lost 9% against the Dollar so far this year.

The State Bank of Vietnam said global inflation is still high, with the U.S. Federal Reserve hiking rates five times recently, Reuters reports, with more forecast for the remainder of this year and 2023.

"This, coupled with the strengthening of the Dollar, has put pressure on domestic interest rates and exchange rate," SBV said in the statement.

Last week, Prime Minister Pham Minh Chinh said Vietnam would monitor prices and seek flexible, cautious monetary policy over the next year, as inflationary pressures are fuelled by global supply problems and soaring energy prices.

The country’s main stock index plummeted to its lowest level since January 2020 on Monday, closing down 3.3%, making a marginal recovery from a previous 4.1% decline. In addition, the Dong fell to a new all-time high for the 13th consecutive session.

The central bank added it would monitor domestic and overseas markets "to timely manage" measures and monetary tools, the Reuters report adds.

The bank went on to say it was ready to intervene in monetary and foreign currency markets “to meet financial institutions' liquidity needs.”

Furthermore, analysts had previously said faster-than-forecast GDP growth for 2022 has given the SBV room to hike its policy rates.

The Vietnamese government said GDP growth may hit 8% this year, surpassing the target range of between 6.0% and 6.5%, and faster than last year’s 2.58% growth.