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Vietnam Monetary Policy March 2023

Vietnam: Central Bank cuts the benchmark refinancing rate by 50 basis points in March

On 31 March, the State Bank of Vietnam (SBV) cut the benchmark refinancing rate from 6.00% to 5.50%. The move follows the Central Bank’s surprise decision to cut several other policy rates earlier in the month.

March’s second consecutive decline in price pressures, the SBV’s assessment that “inflation has been controlled,” and a more stable dong so far in 2023 led the Bank to ease policy for the second time in less than a month. As such, the SBV drifted even further from its regional peers, who are likely only to pause rate hikes. The decision came amid an uncertain global outlook and the need to support growth.

While there was no explicit forward guidance in the Bank’s press release, the overall tone was somewhat bearish, and the Bank highlighted that “domestic economic growth has faced various difficulties”. Most of our panelists expect the Bank to cut further in 2023. Upside risks are posed by a higher risk aversion in global markets and volatile oil prices, which could force the Bank to keep a more restrictive policy. That said, China’s recovery and the evolution of U.S. interest rates are key factors to watch.

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