Vietnam central bank cuts rates for first time in two years

By Reuters March 14, 2023 | 07:04 am PT

An employee counts Vietnamese banknotes at a bank in Hanoi. Photo by VnExpress/Giang Huy

Vietnam's central bank said on Tuesday it is cutting several policy rates, its first cut since late 2020, to increase liquidity and support economic growth, which the country is targeting at 6.5% this year.

The annual rediscount rate, overnight electronic interbank rate, and interest rate for loans to offset capital shortages in clearance between the central bank and domestic banks, would each be cut by 1 percentage point from March 15, the State Bank of Vietnam (SBV) said in a statement.

It is the first such move since October 2020 and reverses a trend of rate increases, with the latest rate hike last October.

It comes as the country's inflation is under control and is part of the government's efforts to stabilize interest rates to remove obstacles for both businesses and individuals, the statement added.

The SBV said it would stay vigilant as central banks around the world are still hiking interest rates with focus on signals from the U.S. Federal Reserve's upcoming policy decision in the wake of the collapse of tech-focused lender Silicon Valley Bank.

Vietnam aims to keep inflation below 4.5% this year.

The Southeast Asian country has been one of the fastest growing developing nations. For 2022, it reported growth of 8.02%, the fastest in decades.

Tuesday's statement included a decrease in the cap on dong loan rates at commercial banks by 50 basis points depending on loan maturities.