U.S. Markets closed

Vietnam Central Bank Cuts Policy Rates as Global Risks Rise

Nguyen Dieu Tu Uyen

(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. 

Vietnam’s central bank cut interest rates for the first time in more than two years to bolster the economy amid rising global risks.

The benchmark refinance rate will be lowered to 6% from 6.25% from Sept. 16, the State Bank of Vietnam said on its website Friday. The discount rate and overnight lending rate in the inter-bank market will be lowered by the same magnitude to 4% and 7% respectively, according to the statement.

The move was prompted by recent “unfavorable” global economic developments, with policy makers elsewhere including the U.S. Federal Reserve and the European Central Bank lowering rates too, the SBV said.

“The domestic economic situation continues to be stable with inflation being under control, money market and foreign exchange being stabilized,” it said.

The U.S.-China trade war is weighing on global growth and hurting prospects for export-reliant nations like Vietnam. At the same time, it’s also creating positive spillovers as some businesses shift production from China to Vietnam.

“This is quite unexpected but it is a good move by the central bank,” said Hoang Viet Phuong, the Hanoi-based head of institutional research & investment advisory at SSI Securities Corp. “It will help bring lending rates down to support businesses and bolster the economy. Interest rates have been kept at quite high levels for a long time,” Phuong added.

The benchmark VN Index rose 1.1%, the steepest advance since July 4. The government is forecasting growth of 6.8% for this year, compared with 7.1% in 2018.

(Updates with comments from analyst in 6th paragraph.)

--With assistance from Nguyen Kieu Giang.

To contact the reporter on this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, John Boudreau

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.