Vietnam Monetary Policy


Vietnam: SBV cuts interest rates for the first time since 2009

March 12, 2012

On 12 March, the State Bank of Vietnam (SBV) reduced its key refinancing rate by one percentage point to 14% from 15%, marking the first rate cut since February 2009. In addition, the SBV cut the discount rate to 12% from 13% and the overnight interbank borrowing rate to 15% from 16%. The move on the refinancing rate undid October 2011's 1% increase, which the SBV had introduced in order to fight rampant inflation. The current decision was favoured by a more favourable inflation scenario. While Vietnam still boasts the highest inflation in the region, prices have moderated from the almost three-year high 23.0% rate recorded in August to the current 16.4%. The Vietnamese monetary authorities' main priority is to rekindle economic growth, as activity begins to show signs of weakness. In the full-year 2011, GDP expanded 5.9%, marking a deceleration compared to the previous year's 6.8% expansion. Currently, the government is targeting growth of 6.0% for 2012. In a subsequent statement, SBV Governor Nguyen Van Binh announced that the Bank could cut interest rates by one percentage point every quarter this year, provided that inflation maintains its downward trajectory.

Author:, Head of Data Solutions

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