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|The trend of international interest rates is still increasing, it is difficult for Vietnam to go against the general flow.|
According to the State Bank of Vietnam, since the beginning of 2022, there have been a total of 340 interest rate hikes globally. But in the first eight months of 2022, the State Bank continued to keep the operating interest rates unchanged. However, since September 2022, global inflation has remained at a high level, the US Federal Reserve (FED) has continuously adjusted operating interest rates and is expected to continue to increase in the future, the dollar appreciated strongly, increasing pressure on interest rates and domestic exchange rates, putting pressure on inflation.
Therefore, the State Bank has twice increased the operating interest rates with a total increase of 2%/year and the maximum deposit interest rate in VND for a term of less than 6 months at credit institutions with a total increase of 0.8-2%/year on September 23 and October 25, 2022. The State Bank also increased by 1%/year the maximum lending interest rate in VND for some priority sectors on October 25, 2022.
According to the State Bank, this is a timely solution, in line with the general trend around the world to prioritize controlling inflation, keeping the foreign currency market stable, and creating new room to adapt to fluctuations in the market, contributing to macroeconomic stability, and ensuring system safety.
In the recently updated Asian Economic Report, HSBC said that the State Bank of Vietnam is the last central bank in ASEAN to tighten monetary policy to face the situation of the weakening VND and rising import inflation.
Entering 2023, HSBC said, the FED is likely to slow down the rate of interest rate hikes to ease the pressure on the foreign exchange rate. However, the increase in core inflation further proves that the interest rate increase cycle of the State Bank is still on track.
Therefore, HSBC forecasts that the SBV will raise the refinancing interest rate by 50 basis points in the first quarter of 2023 and the second quarter of 2023, raising the refinancing rate to 7% by mid-2023.
Similarly, experts at ACB Securities Company (ACBS) forecast that interbank interest rates may increase by 0.5-1 percentage point in the first half of 2023 when the FED is expected to continue raising interest rates. In addition, ACBS maintains its expectation that Vietnam’s operating interest rate may add 1-2 percentage points in 2023.
However, experts of VNDirect Securities Company believe that pressure on domestic interest rates and exchange rates may persist until the second quarter of 2023. Then this pressure will be reduced significantly after the Fed shifts monetary policy to a more neutral direction. Therefore, VNDirect believes that the State Bank can keep the operating interest rate unchanged in 2023.
The reason for the above statement is that the Fed slows down the rate of interest rate increase in 2023 and the dollar index tends to decrease (some leading research organizations forecast the dollar index will be at 103-106 in 2023). Moreover, domestic inflation increased but remained under control.
In the context of reduced exchange rate pressure, the SBV may consider prioritizing the target of stabilizing interest rates to support businesses and the economy, especially in the second half of 2023, maintained at 6.0% and the rediscount rate at 4.5% in 2023. In addition, the pressure on VND is expected to decrease significantly from the second quarter of 2023. VND may increase by 1-2% against USD in 2023 due to FED’s shift from tightening monetary policy to normalization.
According to experts, the Fed’s interest rates will peak in mid-2023 and Vietnam is no exception to that general trend. Economic expert Dr. According to Dinh The Hien said Vietnam’s economy will see fewer difficulties from the second quarter of 2023 and have positive growth from the third quarter onwards with the effect of public investment and monetary stability. As a result, interest rates will cool down in the first quarter and return to stability by the end of the second quarter of 2023.
Talking to the press, Mr. Pham Chi Quang, Director of the Monetary Policy Department (SBV) forecast that the global economy is likely to enter a big recession in 2023; the Fed will continue to increase interest rates.
It is expected that the FED will maintain high interest rates until the end of 2024. However, the magnitude and impact will not be as strong as in 2022, but the level of impact on the economy will persist in 2023.
Therefore, Mr. Quang said that the trend of international interest rates is still increasing; it is difficult for Vietnam to go against the general flow, so the reduction of interest rates in the future is a great effort to maintain a stable market interest rate level. The SBV will use exchange rates, interest rates and credit tools carefully to control inflation, support economic recovery and ensure system safety.