Vietnam’s central bank cuts rate by 1ppt to 5% to support growth amid virus fears

The Vietnam's new benchmark of refinance rate will be lowered to 5% from 6 percent per year from March 17, the State Bank of Vietnam said in a statement posted on its website Monday.

 The discount rate will be lowered to 3.5% from 4%. The overnight lending rate in the inter-bank market will be reduced to 6% from 7%, according to the statement.

In a separate decision, the central bank regulates the maximum deposit interest rate for VND will be lowered to 0.5% from 0.8% for less than one-month term. For one-month to six-month term, the maximum deposit interest rate should be reduced to 4.75% from 5.0%  per year.

For lending, rate will be lowered to 5.5% from 6%. Short term lending rate at microfinance will be trimmed to 6.5% from 7%.

The move was prompted by the on-going unfavorable economic developments in Vietnam and worldwide, the central bank said, adding finance package had been launched.

The decision to cut interest rates was made hours after the U.S. Federal Reserve cut rate to 0 percent to 0.25%.

Vietnam had placed economic growth at 6.8% for 2020 before the coronavirus pandemic happened. The Vietnamese government is seeking solutions to limit the damage and stick to the growth target.

The Vietnam’s stock market suffered the biggest plunge since 2001. On Monday, the VN-Index fell 1.83%  in its fourth consecutive session to 747.86 points, the lowest since early June 2017.

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Source: SBV