The SBV's OMO rate cut showed positive signs
(Updated at 13:6, 16/1/2018)
Over the weekend, the State Bank of Vietnam (SBV) has officially reduced the lending interest rate of open market operations (OMO) for the first time since March 2014.
Specifically, the last time was on March 18, 2014, the State Bank of Vietnam (SBV) reduced interest rates on a large scale, including the OMO with a reduction from 5.5% per annum to 5% per annum.
The 5% per annum has been maintained for almost 5 years, despite the fact that many market conditions have changed significantly, even after a reduction in operating rates in July 2017.
However, at the end of last week, the market has recorded the move in lowering the interest rates of the management agency but only a small downward adjustment from 5% per annum to 4.75% per annum.
Analysts from Bao Viet Securities Company (BVSC) said that this is a step to materialize the message of Governor Le Minh Hung presented at the conference on the implementation of the tasks of the whole banking sector on January 8-9, to support more conditions for credit institutions to consider reducing lending interest rates.
The adjustment of interest rates OMO also takes place before the peak season for payment, i.e. approaching Lunar New Year.
Thus, from July 2017 to date, the State Bank of Vietnam has adjusted some important interest rates. These adjustments are mostly indicative and show caution with small adjustments.
Longer term view on monetary policy orientation, if there is no big shock from the oil price leading to higher CPI, BVSC believes that there is still room for the State Bank to maintain its expansionary monetary policy as in 2017 to keep pace with growth.
In a positive scenario, if average inflation in 2018 is lower than forecasted (only 2-2.5%), there will be opportunities for banks to adjust their deposit rates.
According to BVSC, only when the deposit interest rates decrease, new lending rates may decline as the NIM of the banking system in Vietnam is difficult to reduce further as it is relatively low compared to other countries in the region.
Hong Ngoc
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