[ NEWS ] - A series of analytical organizations forecast that the State Bank will further reduce operating interest rates

According to analysts, the State Bank of Vietnam (SBV) may further reduce operating interest rates if the Fed reverses monetary policy by the end of 2023 and inflation is moderate in our country. The State Bank has made policy reversals faster and more clearly when it has reduced operating interest rates twice within half a month.

Analysts expect the State Bank to reduce operating interest rates

Accordingly, the discount rate and the refinancing rate decreased by 1 percentage point and 0.5 percentage point respectively in the past month. With a number of other-oriented interest rates also tended to decrease such as ceiling interest rates on demand deposits and term deposits from 1 to 6 months, down 0.5 percentage points to 0.5%/year and 5.5 %, respectively. %/year; and the ceiling of short-term lending interest rates in VND for priority sectors decreased by 1 percentage point to 4.5 %/year.

In the statement issued after the above decisions, the SBV revealed that continuing to reduce the above operating interest rates is a flexible solution and suitable for the current market conditions to be able to realize the target of economic recovery economic growth of the National Assembly and the Government, thereby also continuing to reduce the interest rate side of the market, contributing to solving difficulties for businesses and the economy.

At the same time, the adjustment of the operating interest rate has confirmed the direction of the interest rate reduction trend for the market in the near future, thereby also orienting credit institutions to reduce lending interest rates, and together with businesses and consumers people contribute to economic growth. After the drastic policy moves of the State Bank, according to analysts, the operator will have more cuts in operating interest rates in the near future.

Rong Viet Securities (VDSC) assesses that the State Bank has made policy reversals more quickly and clearly in March 2023. Looking at the upcoming monetary policy roadmap, VDSC believes that it is possible to The SBV will be consistent with its loosening orientation in the context that the pressures on inflation, exchange rate tightening, and global monetary policy have partly passed.

"If the risk that many investors are worried about the global economic recession happening, the continued reduction of operating interest rates is probably in the SBV’s forecast," VDSC said. According to Techcombank experts, the State Bank’s decision to cut interest rates is the right time, when the Fed’s rate hike process is at the end of the cycle, plus there are many supporting factors in the country.

The first factor is that although the interest rate differential between Vietnam’s interbank market and the Fed is negative for terms, the USD/VND exchange rate still maintains a stable trend.

The second factor, global inflation has now shown signs of decline but is still anchored at a high level. Meanwhile, Vietnam’s CPI is still being controlled at an appropriate level.

In addition, Vietnam’s economic growth in the first quarter was lower than the target for the whole year of 2023, reaching about 3.32% - the lowest level since 2011.

“With the macro background gradually becoming more stable, the State Bank may cut the operating interest rate. The expected time is around early May 2023 - after the Fed meeting", Techcombank experts forecast.

In the newly released report, experts from Maybank Investment Bank also expect the SBV to continue to loosen monetary policy further.

The reason is that domestic inflation is at a moderate level (below the 4.5% target of the SBV) and the potential policy axis of the Fed (the US futures market is clearly showing the Fed’s interest rate prediction) peaked at around 5.0% in May 2023 and declined by 50 basis points by the second quarter of 2023).

“This will allow the State Bank to cut the operating interest rate by 0.5 percentage points by mid-2023 and by 0.5 percentage points in early 2024,” experts at Maybank Investment Bank said.

KB Securities also believes that the SBV will have more room to loosen monetary policy than in 2023, with the average inflation base scenario being well controlled around 4 - 4.5%. Accordingly, the State Bank may continue to lower policy interest rates by 0.5 percentage points in the second quarter of 2023 to continue supporting the economy.

Similarly, VnDirect Securities also forecast that the State Bank may further reduce the operating interest rate if the Fed reverses monetary policy in the second half of 2023.

For the above reasons, UOB’s Global Markets and Economic Research team believes that the SBV can reduce by a total of 1 percentage point in Q2 2023. This means the refinancing rate will likely drop another 50 points before the end of Q2. In addition, the SBV will probably proceed with other rate cuts cautiously and take into account the domestic price indexes and global growth.

However, UOB said that this does not mean the start of a cycle of drastic rate cuts and at least for now.

“The SBV will likely continue to make the next rate cuts cautiously and thoughtfully. The focus direction of the State Bank will clearly be the trend of focusing on managing domestic inflation,” emphasized UOB.

Hoang Yen (Collection source)