HANOI- Vietnam’s central bank said on Friday it was cutting key interest rates by 50 basis points (bps), its fourth cut in borrowing costs this year, in an effort to boost growth as the manufacturing-led economy weakens amid softening global demand.
The refinance rate was cut to 4.5 percent, the discount rate to 3.0 percent and the electronic interbank rate to 5.0 percent, the State Bank of Vietnam (SBV) said in a statement. The change is effective on Monday.
The government, which oversees the communist country’s economic and banking policies, had only a few hours earlier urged the central bank to “immediately take practical measures” to lower interest rates this month.
The SBV has so far this year cut the refinance and discount rates by 150 bps and the electronic interbank rate by 200 bps, offsetting nearly all of its tightening since mid-2022 to curb surging inflation.
It said its adjustments were aimed at “reducing interest rates, supporting households and businesses’ access to funding, and therefore contributing to the recovery of manufacturing”.
Vietnam’s economic expansion was facing headwinds, it said, but inflation was under control and liquidity of both domestic and foreign banks was healthy.
Some analysts had expected at least another 50 bps of rate cuts this year.
Can Van Luc, a government adviser and an economist at the Bank for Investment and Development of Vietnam, said the US Federal Reserve’s decision on Thursday to pause its rate increases, coupled with Vietnam’s easing inflation, had created room for the SBV to cut rates further. Reuters
