Central banks in many countries no longer pursuing tight monetary policies has eased the pressure on domestic interest rates, said Pham Thanh Ha, head of the SBV’s Monetary Policy Department.
The SBV’s recent cut of reference interest rates will allow credit institutions to access capital from the SBV at a lower cost and stablise their own rates, Ha said.
In the time ahead, the SBV will continue monitoring local macroeconomic trends and monetary market to flexibly employ monetary policy instruments, in order to control inflation, stablise the macroeconomy and support economic growth, he said, adding the central bank will maintain a 14-percent credit growth target for this year.
On September 16, the SBV cut several key interest rates by 0.25 percentage point to support economic growth. The rate cuts were the first by the SBV since October 2017.
Accordingly, the annual refinancing rate and rediscount rate were lowered from 6.25 percent to 6 percent, and from 4.25 percent to 4 percent, respectively.
The annual overnight electronic interbank rate and rate of loans to offset capital shortage in clearance between the central bank and domestic banks were also cut to 7 percent.
The interest rate of bids of valuable papers through open market operations was reduced from 4.75 percent to 4.5 percent.
According to the SBV, it previously took monetary policy measures to stabilise interest rates amid rising rates in the international market, which contributed to macroeconomic stability and supported growth at reasonable levels.
However, it has decided to make the new move as the global economy has become more volatile and less favourable, while central banks of many countries, including the US Federal Reserve (Fed) and the European Central Bank (ECB), have cut key interest rates.
The cut was made with the macroeconomy remaining stable, the economy expanding 6.76 percent in the first half of the year, inflation put under control, and the monetary and foreign exchange markets staying stable, the SBV said in the statement.
It is considered a reference for the market to follow suit. It would also be an effective measure to support liquidity for commercial banks, helping them cut input costs so as to ensure the stability of lending interest rates.