The State Bank of Vietnam, Vietnam’s central bank, announced the decision to cut the benchmark interest rates by 25 basis points or 0.25 percentage points amid unfavorable global economic environment and major central banks having cut their respective interest rates.
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Following the decision, the refinancing interest rate is down from 6.25% per annum to 6%, rediscount rate from 4.25% to 4%, overnight interest rate from 7.25% to 7% and interest rate via OMO from 4.75% to 4.5%.
The move marked the first time since October 2017 that the SBV cut the benchmark interest rate, which is expected to help commercial banks reduce cost for refinancing and re-discount loans from the SBV, in turn partly reducing loan rates.
According to the SBV, the unfavorable global economic environment has led to major central banks, including the Federal Reserves (FED) and the European Central Bank, reduce the benchmark interest rates.
The ECB previously announced to lower its deposit interest rate by 01% to a record low of -0.5%, and is expected to start buying assets worth EUR20 billion (US$22.18 billion), starting November.
Over the past few months, the FED has issued warning that the escalation of trade war and slowdown in global economic growth are potential risks to the US economy. As such, its decision to lower the interest rate by 0.25 percentage point in July was aimed to prevent any shock to the economy and ensure the inflation rate staying below the target.
Analysis predicted FED could cut the interest rate further in the remaining months of 2019, especially when the outlook of the US economy remains dim.
