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Source: Socialist Republic of Vietnam

The deposit rates for terms of from one month to less than six months are now capped at 4.0%, down from the previous ceiling of 4.25%.

This is the third time in 2020 that the central bank had slashed its policy rates, by up to 0.5 percentage points each time.

But prior to the central bank’s decision, several banks had already brought their rates on short-term deposits to below 4%.

According to the central bank, the latest rate cut was designed to continue supporting the economy which was severely hurt by the coronavirus pandemic, specifying that the economy expanded by 2.12% in the first nine months of the year and inflation was kept under control at 3.85%.

Economist Vo Tri Thanh said the State Bank’s rate cut was not unanticipated because it had previously signalled at making such a move when allowed by market conditions.

He stated that falling inflation, banks’ strong liquidity and low credit growth are the foundations for the central bank to lower its policy interest rates such that commercial banks can provide cheap loans to bolster the economy.

But rate cuts are not the most important factor according to many experts, who noted that slow credit growth is mainly due to the economy’s weak demand. Therefore whether the economy can take in credit will depend on the pandemic situation and the global economic recovery.

MIL OSI Asia Pacific News