Four signals hint towards lower interest rates in next month

There are now four clear signals that hint towards coolling down of the lending interest rate to 17-19% per year in the next month, according to Cao Sy Kiem, former Governor of the State Bank of Vietnam (SBV).
This week, the central bank will work with commercial banks about lowering the interest rates, forex rate and gold management.

Last week, SBV’s Governor Nguyen Van Binh said the central bank will work with 12 largest commercial banks to discuss solutions to reduce interest rates, stabilize the forex rate and manage the gold market in accordance with the government’s direction.

Kiem said there are now four reasons for reduction of lending interest rate in September to about 17-19% per year level. First, inflation is falling.

According to the figure of Hanoi Statistics Office, Hanoi’s consumer price index (CPI) in August increased about 1.06% from July and the HCM City’s CPI in August rose by 0.68% month on month, marking the lowest level in the first eight months of this year.

Second, liquidity at commercial banks has been improved significantly, therefore banks have conditions to reduce costs and increase revenue via services. In addition, banks also choose customers to offer loans.

Third, the central bank is actively expanding its role of state management to support commercial banks via the open market operations (OMO), reduce the discount interest rate and the refinancing interest rate.

Last, the government’s Resolution No 11 has positive changes, so businesses can recalculate to borrow capital for business and production activities.

However, according to Kiem, lowering interest rates in September will depend much on the central bank’s upcoming policies.

Binh said that this week, the central bank together with other departments will review the provision relating to capital mobilization in the interbank market.

This is one of solutions to regulate the money inflow, at the same time create the link between the interbank market and capital mobilization market from individuals and institutions.

The Governor also stressed in early September 2011, predictable and oriented policies and measures will be publicized clearly, at the same time policies must be feasible and suitable to the reality. – Vietbiz24

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial, Vietnam interest rates