Vietnam’s central bank lowered its key interest rates by 25 basis point for the first time in over two years to support economic growth at a time of a “less favourable” state of the world economy in which many central banks, including the U.S. Federal Reserve and the European Central Bank, have lowered their interest rates.
The State Bank of Vietnam (SBV) cut its benchmark refinancing rate by 25 basis points to 6.0 percent, the rediscount rate to 4.0 percent and the overnight lending rate to 7.0 percent, and the rate on valuable papers offered through open market operations to 4.50 percent.
It was SBV’s first rate cut since July 2017 and the new rates will take effect on Sept. 16, SBV said in a statement from Sept. 13.
The central bank added the economy continues to be stable, inflation is under control and money and foreign exchange markets are stable.
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As most other economies worldwide, Vietnam has been affected by the slowdown in global trade and its gross domestic product has slowed slightly to annual growth of 6.7 percent in the second quarter from 6.8 percent in the first quarter and 7.3 percent in the fourth quarter of last year.
In July the International Monetary Fund forecast Vietnam’s economic growth would ease to 6.5 percent this year and 2020 from 7.1 percent in 2018, with activity supported by higher income and consumption by the growing and urbanizing middle class, a strong harvest and manufacturing.
Vietnam’s inflation rate eased to 2.26 percent in August from 2.44 percent in July but the IMF forecast it would average 3.6 percent this year and 3.8 percent next year compared with 3.5 percent in 2018.
Vietnam’s dong has been relatively stable in the last 12 months, trading at 23,249.9 against the U. S. dollar, down 0.3 percent this year.