Central bank takes looser monetary measures

The SBV has stopped offering treasury bills since this week. This was the first time in many months that the SBV has not issued new bills.

The SBV this week also continued to reduce the bill interest rate from 4.2% per year to 4.15% per year. This was the third time this month that the SBV reduced the interest rate on bills. Previously, on Aug. 5, the SBV cut the rate from 4.5% per year to 4.25% per year. The rate was then further reduced to 4.2% on Aug. 20.

The SBV still maintains a liquidity support through open market operation (OMO) channel with more than VND5.98 trillion (US$240.3 million) at a term of 14 days and an interest rate of 4.25%. Compared to previous trading sessions, the OMO term doubled, while the interest rate remained unchanged.

Previously, the SBV also reduced the OMO interest rate from 4.5% to 4.25% on Aug. 5.

After continuously maintaining a net withdrawal of liquidity since the beginning of June 2024, the SBV this week injected a net amount of more than VND9.1 trillion into the banking system.

The SBV’s move to gradually reduce interest rates and stopping treasury bill issuance early this week shows the SBV's orientation to support the liquidity of the banking system, in order to contribute to establishing a lower interbank interest rate level shortly.

At the same time, increasing the OMO loan term while keeping the interest rate unchanged also shows the SBV's initiative in reducing the interbank interest rate level.

The SBV has continuously implemented monetary loosing measures in the context of sharp declines in the exchange rate in recent days.

On the interbank market, the USD/VND exchange rate fell below VND25,000 last week and continued to fall this week. Since the beginning of August, the rate has decreased by 1.4%.

The exchange rate listed at commercial banks has also continuously decreased in recent weeks, to the range of VND25,000 for selling and VND24,700 for buying. Since the beginning of August, the dollar price at banks has decreased by nearly VND400, equivalent to about 1.5%.

The exchange rate on the unofficial market has also continuously declined sharply and is currently trading at VND25,200-25,300 per dollar.

The rate on the unofficial market has started to fall sharply in the past month, especially in the first half of August. Compared to the peak of nearly VND26,000 set at the end of June, the dollar price on the unofficial market is currently VND700 lower, equivalent to a decrease of about 2.7%.

According to analysts, the rapid cooling of the exchange rate creates conditions for the SBV to implement a looser monetary policy, in order to support liquidity for the banking system and the economy.

"In the context of positive macroeconomic signs, along with the SBV's direction, liquidity is expected to be more stable and abundant, which can help interbank interest rates decrease again," analysts of the Vietcombank Securities Company (VCBS) commented in a recent macroeconomic report.