So while New Zealand raised interest rates to control inflation, Vietnam will cut its key policy rates from tomorrow, as the government tries to support businesses and bolster a struggling economy.
The discount rate will be cut to 4.5 percent from 5 percent, and the repurchase rate will be lowered to 5 percent from 5.5 percent, the central bank’s monetary policy head Nguyen Thi Hong said at a briefing in Hanoi today. The refinancing rate will be reduced to 6.5 percent from 7 percent.
“The policy-rate cuts aim to deepen the government’s support to businesses,” Nguyen Dong Tien, State Bank of Vietnam’s deputy governor, said at the briefing. “The rate cuts will help boost lending demand and bolster economic growth.” The central bank has projected an annual credit growth of 12-14 percent, after loans rose 12.51 percent in 2013.
In parts of 2011, the annual inflation rate topped 20 percent. In 2013, it was 6.6 percent, the lowest in a decade, and Hong said the pace should again be below 7 percent this year.
“Domestic demand in Vietnam is very weak,” said Trinh Nguyen, Hong Kong-based economist at HSBC Holdings Plc. While the rate cuts are noteworthy, with the “sluggish pace of finance-sector reforms, growth and credit growth will continue to be very lackluster this year.”
Read more at: