[NEWS] - Will there be a 4th reduction in operating interest rates?

According to experts, there is still plenty of room for the State Bank to lower the operating interest rate again this year. At the same time, the Fed’s mid-June meeting will be one of the main factors affecting interest rate decisions in the coming time.

On May 25th, the State Bank of Vietnam (SBV) adjusted down 0.5 percentage points of a series of operating interest rates and ceiling interest rates for deposits with a period of 6 months or less to 5 %/year. This is the 3rd time in a row that the SBV has adjusted the operating rates in more than 2 months.

Although the operating interest rate has decreased, the data shows that the cost of accessing loans in the economy remains high. Specifically, according to the SBV’s data, by the end of April 2023, the average lending interest rate of domestic commercial banks for new and old loans with outstanding balances is 9.6 - 11.2%/ year, there has not been much change compared to the beginning of the year (9.4 - 11.2/year). In addition, at the Government meeting in May 2023, Deputy Governor of the State Bank Pham Thanh Ha added that the lending interest rate for new loans, with the current average of about 9.07%, has decreased slightly but is still at a high level.

Many businesses and consumers think that, although the operating interest rate has been reduced, the reduction is not strong enough. The State Bank needs to reduce the operating interest rate one more time and somewhat more drastically.

However, experts said that the lowering of operating interest rates in the past 3 times by the State Bank was appropriate and timely. Along with that, it takes time for the policy to penetrate the economy and affect deposit and lending rates. In addition, most also agree with the policy interest rate to be lowered again this year.

At the program "Morning Cafe with LM2: Increased liquidity, choosing to deposit gold" organized by Mirae Asset Securities (MAS) recently, Mr. Bui Tien Duc, head of MAS consulting department shared, After many cuts in operating interest rates, lending rates also began to decrease. However, it still takes time to see the effects more clearly policy. At the same time, there are many indicators that the SBV still has room to lower the operating rate.

More specifically, the data recently released by the General Statistics Office showed that in May, inflation fluctuated at only 2%, much lower than the target of controlling below 4% set by the National Assembly. Besides, the current oil price is stable at around 70 USD/barrel. At the same time, there are many forecasts showing that the global economy, especially in Europe and America, is not very positive and demand will hardly explode this year. The low anchor oil price will also be a good support condition for inflation control.

"When inflation is low, the State Bank will have more room to continue reducing operating interest rates," said Mr. Bui Tien Duc.

Mr. Duc also shared that the unemployment rate in the US has increased from 3.4% to 3.7%. In addition, inflation is gradually decreasing. Most analysts see the monetary policy of the US Federal Reserve (FED) as moving in the right direction. It is highly likely that these agencies will keep interest rates unchanged in the upcoming meeting. Accordingly, with pressure on Vietnam’s interest rate level, it is not too high compared to before.

In the Order Matching program broadcast on the VTV Digital platform at the end of May, the Director of Analysis of Nhat Viet Securities JSC - Mr. Nguyen Minh Hoang shared that the Fed’s actions are still unpredictable. It is too early to think about the 4th cut of the operating rate.

According to Mr. Hoang, if operating interest rates continue to decrease, mobilization costs at banks will also continue to go down. However, there is a large number of savings books deposited at the end of 2022 and early 2023 (the high-interest period) that are about to mature. If deposit interest rates continue to fall, with this cash flow, it will be possible to feel that saving money is not too attractive and will go out of the deposit channel. At the same time, this will also put pressure on banks’ capital mobilization.

“Currently it is still a bit early for the State Bank to lower the operating interest rate. The Fed still has another FOMC meeting in mid-June. Recently, investors thought that the agency might continue to raise interest rates by 0.25 percentage points. If this becomes a reality, the problem of attracting foreign investment inflows and the exchange rate will likely be under more pressure,” said Mr. Minh Hoang.

From the point of view of the General Director of Wi Group data company - Mr. Tran Ngoc Bau, the liquidity of the banking system is generally redundant in a short time. However, total credit in the economy is still quite high when compared to mobilization. In addition, recently, the bad debt in the balance sheet of banks has also increased. At the same time, the bad debt coverage ratio decreased rapidly. Although there have been policies to delay and restructure debt, these problems are still causing considerable pressure on the liquidity of banks.

“Even if the State Bank of Vietnam increases liquidity, banks will tend to protect themselves against money hoarding instead of boosting lending, because bad debt is increasing and bad debt coverage ratio is decreasing. strong. Policy interest rates may decrease further, but lending rates and deposit rates will decrease more slowly," said Mr. Tran Ngoc Bau.

The economic situation of our country in particular and the world economy in general has been continuously affected for two years by the pandemic and then continued to be affected by the global economic crisis. A series of banks, businesses, and employees... faced many difficulties. Since the beginning of the year, there have been 3 consecutive reductions in the operating rate and many experts hope to have the 4th reduction in the operating rate to improve the current economic situation. To help small and medium enterprises overcome the difficult period, Indochina Holding specializes in providing financial consulting services and supporting loans from funds with the lowest interest rates. At the same time, supporting small and medium enterprises with effective investment and business strategies.

Hoang Yen (Collection source)