Vietnam’s inflation rate will still probably surpass 10 percent and rise to almost 11 percent this year in spite of a slowdown reported in the latest figures, Citigroup Inc. said.

Vietnamese inflation slowed in April to a year-on-year rate of 9.2 percent, down from 9.5 percent in March and the first reduction in the rate since August. Prices rose 0.14 percent in April from March, the lowest figure since a decline in monthly inflation in March 2009.

Moody’s Investors Service said last month that Vietnam had yet to quell inflationary expectations, and Fitch Ratings cited the risk of a further build-up in price pressures when it put the country’s debt rating on negative watch.

“Given that the deceleration is largely driven by food prices, which can be very volatile, we would be wary of extrapolating benign inflation trends this year,” wrote Johanna Chua, the Hong Kong-based head of Asian economic research at Citigroup.

Overall food prices rose 9.56 percent in April from a year earlier, slower than March’s 10.73 percent, according to the General Statistics Office in Hanoi. From a month earlier, food prices dropped 0.63 percent, with the sub-category including rice sliding 1.91 percent.

“We still expect headline inflation will hit double-digits in the coming months, peaking close to 11 percent,” Chua wrote.

Credit Policies

Credit policies in Vietnam have become more restrictive since last year, she wrote. Credit expanded 38 percent last year in Vietnam, and the central bank has said it’s targeting a 25 percent figure this year and that lending in the first quarter grew 3 percent.

Still the central bank shouldn’t take the recent inflation figures as a signal to loosen monetary policy, Chua said.

Vietnamese Prime Minister Nguyen Tan Dung last week asked state-owned banks to cut their lending rates, according to Thoi Bao Ngan Hang newspaper.

“We don’t think this recent figure is a clear trend,” Chua wrote. “One risk is that a temporary turn in inflation could lead the State Bank of Vietnam to reverse or delay much needed monetary tightening.”

A removal of a past link between a central bank benchmark and maximum lending rates at commercial banks caused some borrowing rates to surge to 18 percent, HSBC Holdings Plc said on April 23.

“More recently, rates have started to stabilize at around 14 percent,” wrote Wellian Wiranto, a Singapore-based economist at HSBC. “The central bank must be thankful for the space that seasonally low food prices has offered them.”