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Wednesday, April 2, 2025

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monetary policy

Falling interest rates: a boon or a bane?

Deposit and lending rates are showing signs of stabilizing and gradually decreasing, following a significant upward trend that had persisted from Q4 2024 to early 2025 Weak credit growth and the effort of the State Bank of Vietnam (SBV) to lower rates have contributed to reducing interest rates in both the primary (M1) and interbank (M2) markets. However, challenges remain, as the Government’s target of high credit growth this year will put considerable pressure on money demand and overall interest rates. Interest rates trend down in both markets Recently, deposit interest rates in the primary market (serving households and businesses) have fallen at many banks, following strong directives from the Government and the SBV. Meanwhile, lending rates have remained stable or slightly declined. In the interbank market, interest rates have also trended down and remained relatively stable as the SBV stopped withdrawing liquidity through treasury bill issues, and instead injected money into the system via open market operations (OMO) at an annual interest rate of 4% with longer terms, up to three months, compared to just one week previously. The Government and the SBV’s determined efforts to reduce interest rates to ensure the GDP growth target of 8% or higher […]
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