Were interest rates recently hiked to either “harmonize” with foreign exchange rate management objectives, or indicate a shift towards ending the monetary loosening policy intended to support the economy? Interest rates are rising again The State Bank of Vietnam (SBV) increased interest rates for open market operations (OMO) and Treasury bills on May 22 this year. The SBV lent nearly VND25,000 billion to nine members in the seven-day OMO channel at an annual interest rate of 4.5%. Compared to the previous session, both the loan amount and the interest rate were revised up. This was the second time in a month that the central bank hiked the OMO interest rate. Previously, it adjusted up the yearly interest rate for loans from 4% to 4.25% on April 23, with securities used as collateral. Also on May 22, the SBV issued VND650 billion in 28-day Treasury bills with a winning coupon rate of 4% per year, up from 3.9% in the previous session. The higher OMO and Treasury bill interest rates indicate that the SBV is seeking to revise up short-term rates. The rate hikes took place at a time when the exchange rate between the Vietnam dong and the U.S. dollar […]