Vietnam’s central bank will implement a fourth round of monetary policy easing effective Monday to spur an economy that’s losing momentum amid slumping exports and property sector woes.
The State Bank of Vietnam said it will implement a 50-basis-point reduction each in the refinancing rate, discount rate and overnight lending rate to inter-bank effective June 19, according to a statement on its website.
The following rates will be trimmed: refinancing rate to 4.5% from 5%, discount rate to 3% from 3.5%, overnight lending rate to inter-bank to 5% from 5.5%, according to the SBV. It also lowered the dong deposit rate cap for terms of one-month to below six months to 4.75% from 5%, the central bank said.
The latest policy easing follows instructions from government authorities “to help stabilize the macro-economy, the money market and strive to reduce lending rates for businesses and people,” the central bank said in a statement. The move aims to support the economy that’s facing “many difficulties,” it said.
Vietnam, one of Asia’s bright spots before the pandemic, was quick to loosen policy settings by March as the economy slowed amid a credit crunch in the real estate sector and shrinking exports. Its central bank raised borrowing costs by 200 basis points last year, in part to stem the currency’s slide.
“Another rate cut in a matter of weeks seems to suggest that the central bank thinks economic growth has bottomed out and such aggressive monetary easing will not significantly add to inflation pressures,” said Ruchir Desai, a co-fund manager at the AFC Asia Frontier Fund.
The Federal Reserve’s decision to pause its monetary tightening this week probably gave the SBV scope to cut rates further, said Desai. Vietnam’s dong was little changed after Friday’s decision while the stock index rose.
Policymakers cut its discount rate and the overnight lending rate in the interbank market by 100 basis points on March 15 and reduced the refinancing rate by half-point by end-March. In May, SBV trimmed the refinancing rate again by 50 basis points, continuing a spate of measures to aid the economy.
The benchmark stock index rose much as 1.1% as of 1:07 p.m. in Hanoi, on course for its highest close in more than eight months. The dong was little changed at 23,529 per dollar, trading near the lowest since March.
--With assistance from Aradhana Aravindan and Karl Lester M. Yap.
(Updates with more details and analyst comment.)
