Central bank to cut deposit interest rate ceiling

The central bank will keep the maximum interest rate on deposits of under a month at 0.5% a year, while the rate for term deposits of 1-6 months would drop from 5.5% to 5% a year, it said in a statement on Tuesday.

Banks will still be allowed to determine their own interest rates for term deposits of above six months “in accordance with the market.”

This is the second time the SBV has reduced the deposit interest ceiling this year.

The central bank will also cut the overnight electronic interbank rate to 5.5% from 6.0%, while keeping the key discount rate at 3.5%, it said in a statement. It will cut the refinance rate from 5.5% to 5%.

The fresh rate cuts are “aimed at lowering the interest rate levels to help businesses and households have better access to credit,” the SBV said in the statement.

The central bank said inflation in Vietnam is under control while banks’ liquidity is abundant, facilitating its move to cut the rates, according to Reuters.

April consumer prices rose 2.81% from a year earlier. The government is targeting average inflation of 4.5% for the year.

Vu Hong Thanh, head of the Economic Commission, said the economy has shown signs of decline since the end of 2022, resulting in GDP growth of only 3.32% in Q1.

Vietnam targets economic growth of 6.5% this year, slower than an expansion of 8.02% last year.