Hanoi (VNA) ꦫ– Given the continued macro-economic stability in Vietnam, a long-term downward trend in global interest rates, and moderate domestic inflation, experts predicted that regulatory interest rates may decrease further, helping bring interest rates for Vietnamese dong deposits to the pre-pandemic levels.

Key interest rates may fall by another 50 basis points

One of the reasons behind experts’ recommendation for easing the monetary policy is that inflation in the US has shown signs of cooling down, and the US Federal Reserve (Fed) is expected to cut interest rates twice within 2023, instead of 2024 like what was said in the minutes of its meeting last March. Techcombank analysts held that if there are any interest rate cuts by the SBV, they will be at the right time as Fed is now at the end of its rate hike cycle, not to mention many favourable domestic factors currently in place. The first factor is that though interest rate differences between the Vietnamese inter-bank market and Fed are negative for short-term loans at present, USD/VND exchange rates remain stable. The second factor is that global inflation tends to decline but is still high. Meanwhile, the consumer price index (CPI) in Vietnam has been kept at an appropriate level. In addition, the country’s economic growth in the first quarter stood at 3.32%, lower than the 2023 target and also the lowest since 2011. With more stable macro-economic fundamentals, the SBV may continue slashing regulatory interest rates in early May, after a Fed meeting, Techcombank analysts forecast. Echoing the view, experts of the Vietcombank Securities Company perceived that this is a prerequisite for the SBV to adopt a more flexible monetary policy to aid efforts to reach the growth target, which has become harder to be achieved. They predicted that in favourable conditions, regulatory interest rates may go down further in 2023 to bring down interest rates in general, thus promoting businesses and people’s access to capital. In a recently released report, analysts of Maybank Investment Bank also expected the SBV will continue easing the monetary policy, noting this will enable the central bank to cut regulatory interest rates by another 50 basis points in mid-2023 and an additional 50 basis points in early 2024.

Deposit interest rates hoped to continue decreasing

The SBV recently cut regulatory interest rates by 0.3% - 0.5% per year, the second time in less than a month, which is hoped to support economic recovery. Shortly after that, many banks have reduced interest rates for most deposit and loan terms, by 0.3% - 0.8%. Lower lending interest rates are set to stimulate loan demand in the coming time since credit growth in Q1 was relatively low. Interest rate cuts will fuel credit, thereby encouraging enterprises and people to borrow capital to fund their production, business, and consumption. The move will also help credit institutions raise revenue from accompanying services. This is an important impulse amid current difficulties, said expert Can Van Luc. Analysts of the VNDirect Securities Corporation said interest rates for 12-month deposits at commercial banks have dropped by 50 basis points from the peak in January to stand at 7.1% - 8.4% per year. They projected the rates to keep falling until the end of 2023, to 7% per year. A Techcombank leader also hoped deposit interest rates will be brought down to the pre-pandemic levels, noting that the SBV’s efforts have been helping the rates for Vietnamese dong deposits decline substantially./.