Before the stressful period, the average overnight interbank interest rate was only 0.1 - 1% p.a., the highest point at the end of 2022 exceeded the threshold of 7% and then gradually cooled down;  and until now has been below 3% p.a.

According to new data released by the State Bank of Vietnam (SBV) on March 20, the average overnight interbank interest rate decreased by 0.8 percentage points to 2.7% per year. This is the first time since the end of August 2022, the interbank interest rate at this term has dropped below 3% p.a.

In the second half of 2022, interest rates on the interbank market fluctuated at 5% - 6% p.a., sometimes reaching a record high of over 7% p.a. due to systemic liquidity stress. Previously, the interbank overnight interest rate was only 0.1 - 1% p.a.

In the week from March 14 to March 17, the interbank term interest rate dropped sharply and at the end of the week it was recorded at 3.5% (decreased by 2.7 percentage points) in the overnight term. The difference between VND and USD interest rates reversed to negative position.

Interbank interest rates have continuously decreased after the State Bank of Vietnam (SBV) made a move to cut the operating interest rate. Specifically, a reduction of 1 percentage point for the rediscount interest rate and the overnight lending rate in inter-bank electronic payments and loans to cover capital shortfalls in clearing payments by the SBV for credit institutions.

Many analysts said that this measure is appropriate in the current context to remove difficulties for the economy, with the goal of reducing the deposit and lending interest rates in the market.

The implication in the interest rate reduction shows that the State Bank is giving priority to GDP growth when economic data in the first two months of the year are not very positive, showing a decrease in import and export markets, tourism or  domestic demand.

Kylie Nguyen