Dong rates in July averaged 18.64 percent, with loans for the agricultural and export sectors at 16-21 percent, rates for other production and business activities at 18-22 percent and 20-25 percent for non-manufacturing sectors, the central bank said in a monthly report on Wednesday.

The State Bank of Vietnam will work with banks to try to get rates down from mid-September; Governor Nguyen Van Binh was quoted as saying in the report posted on news website NDHMoney.

Binh, who was confirmed in his post by parliament this week, said the central bank would use policy instruments for its market regulation and would "minimise the use of administrative intervention measures".

The central bank will maintain a tight monetary policy, Binh said, without giving details.

Vietnam has responded to a surge in inflation with a string of measures since February, including several increases in policy rates.

It cut the interest rate it charges for loans in open market operations by 100 basis points to 14 percent on July 4 but some economists said that may have simply reflected liquidity flows.

Other key rates were left steady, including the refinance rate and the discount rate, which were lifted 100 basis points at the end of April to 14 percent and 13 percent respectively.

Annual inflation accelerated to 22.16 percent in July despite the monetary tightening and pledges of fiscal austerity.

The government has cut its credit growth target to below 20 percent this year to curb inflation from an initial target of 23 percent, following a rise of 27.65 percent in 2010.

Bank loans as of July 20 had risen 7.57 percent from the end of 2010, the central bank's report said.

Binh said the central bank would keep a reasonable volume of the domestic currency in circulation and avoid any surpluses while aiming to keep interest rates at a level beneficial for depositors.

He also said foreign reserves were "relatively large" and sufficient to intervene to meet any shortage, and that the central bank would aim for a stable foreign exchange rate.

Vietnam has added nearly $4 billion this year to its foreign reserves, the government said last month. It gave no total value for reserves, which are regarded as a state secret.

The dong has fallen 22 percent against the dollar since the start of 2008 but has stabilised in recent months.

Binh is a career central banker who, until his promotion, had been one of five deputy governors since early 2008. He oversaw the bank's external relations and is seen by some overseas analysts as a steady pair of hands.

Copyright Reuters, 2011