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Vietnam Monetary Policy March 2020

Vietnam: State Bank of Vietnam slashes interest rates in March to safeguard the economy

On 16 March, the State Bank of Vietnam (SBV) reduced several interest rates, with the refinancing rate being cut from 6.00% to 5.00%.

The SBV’s move was aimed at shoring up economic activity in the face of the threat to global growth posed by the coronavirus. Moreover, the U.S. Federal Reserve and several Asian central banks have recently eased their monetary stances, providing the SBV with more leeway to cut rates. Lastly, although inflation has been high in recent months, this is partly due to the impact of African swine fever on pork prices, and the recent plunge in global oil prices should help soften inflation going forward. As such, the Bank was likely confident that lower rates would not lead to a jump in inflation.

Looking ahead, the SBV gave no explicit guidance on future rate movements, and much will depend on the evolution of the coronavirus pandemic. If the pandemic continues to worsen, further monetary loosening to support activity cannot be ruled out.

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