Cambodia's Central Bank Faces Unique Challenges in Fighting Inflation

Cambodia's central bank can't raise interest rates to fight inflation because most of its loans and savings are in US dollars, not riel.

This makes it difficult for the central bank to control monetary policy, as interest rates on dollar-denominated loans are set by foreign institutions, such as the Federal Reserve in the US. Even if Cambodia's central bank raises its own interest rate, it would have little impact on inflation.

Cambodia's headline inflation is currently low at 1.3%, but forecasters expect it to rise to 4.5% due to global oil price shocks. However, this is not driven by domestic overheating, which is what interest rate hikes are typically aimed at.