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Vietnam’s central bank cuts interest rates

The Saigon Times

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HCMC – The State Bank of Vietnam (SBV) made two separate decisions today to lower interest rates by 0.5 to one percentage point, with effect from tomorrow, March 15.

Under the SBV’s Decision 313/QD-NHNN, the rediscount rate will be down from 4.5% to 3.5% per year.

For overnight loans in interbank electronic payments and loans made by the central bank in clearing transactions with commercial banks, the rate will fall from 7% to 6% per year.

The refinancing interest rate will remain unchanged at 6% per year, though.

In its Decision 314/QD-NHNN, the SBV adjusts down the maximum short-term lending interest rate in the Vietnamese dong for borrowers to meet capital needs in the economic sectors and industries listed in Circular 39/2016/TT-NHNN dated December 30, 2016, such as agriculture, rural development, small and medium enterprises, and exporters. The rate will be 5% per year, down from the current 5.5%.

The maximum interest rate for short-term loans in the Vietnamese dong at people’s credit funds and microfinance institutions will drop from 6.5% to 6% per year.

The central bank explained that the rate cuts this time are a solution taken under the current market conditions to back the National Assembly’s and Government’s economic recovery efforts.

But the SBV still sees inflationary pressure as cause for concern. In the first two months of this year, Vietnam’s inflation rate grew close to the 4.5% target while there is little sign of global inflation cooling anytime soon.

The SBV said it would keep a close watch on the domestic and foreign markets to make timely policy adjustments.

Last month, commercial banks agreed to lower deposit interest rates to offer cheaper loans to businesses.

In 2022, the SBV made two interest rate hikes, with a one-percentage rise on each of September 23 and October 25, due to the U.S. Federal Reserve’s aggressive interest rate hikes amid runaway inflation in the U.S.

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