Monetary Policy Easing to Boost Growth
- Experts suggest that the Vietnamese economy requires further stimulus to meet its 2025 growth targets, advocating for bolder measures in economic, financial, and monetary policy.
- Monetary policy is evolving globally, with clear indications of easing in various countries.
- One analyst said the central bank is signaling a relaxation of monetary policy through actions affecting banks and the market.
Central Bank Signals Potential Shift in Monetary Policy
March 23, 2025
National Bank’s Signal
Experts suggest that the Vietnamese economy requires further stimulus to meet its 2025 growth targets, advocating for bolder measures in economic, financial, and monetary policy.
Monetary policy is evolving globally, with clear indications of easing in various countries.
One analyst said the central bank is signaling a relaxation of monetary policy through actions affecting banks and the market.
In mid-Febuary, the State Bank of Vietnam (SBV) reduced interest rates on government bonds and suspended the issuance of Treasury bonds. This suggests the central bank may be allowing interbank interest rates to fluctuate within a lower range, potentially operating between 0-4% instead of a fixed rate.
The analyst noted this decision occurred despite uncertainties surrounding exchange rates and actions by the Federal Reserve System.
The National Bank has also reportedly influenced deposit rates, leading to a sharp decline.
One analyst predicts the National Bank will gradually lower interest rates, with the initial step affecting credit securities, followed by the OMO interest rate. Subsequent steps will impact the upper limit of deposit interest rates, especially for terms less than six months, and eventually influence more stimulating rates.
This is a journey and must be made in stages, and the National Bank is doing that journey very well.
Another expert noted a limit to the interest rate spread between different market segments in Vietnam, suggesting the impact isn’t always immediate. Though, they added that if conditions are favorable and external risks decrease, the National Bank coudl reduce the operating rate.
Regarding investment interest rates, experts anticipate lower foreign currency accumulation, allowing the national bank to purchase dollars, increase foreign exchange reserves, and inject VND into the market. This could boost liquidity and lower company interest rates.
Moreover, accelerated public investment this year could channel funds back into the system, further supporting banking system liquidity.
Defining a Rate Cut
The National Bank has stated its intention to manage credit and monetary policy effectively in 2025.the Vietnam National Bank has set a credit growth target of 16%, encouraging banks to promote credit effectively.
Inflation is still 16%, and if the banking system is stable, safe, and there is no problem, the National bank is ready to further relieve the limit,
a vice president emphasized.
The vice president also affirmed the National Bank’s commitment to ensuring bank liquidity, which would alleviate the need for banks to raise deposit rates.
The National Bank plans to utilize refinancing and other tools more flexibly, participating in the banking market to address capital needs. Management has agreed to maintain a stable and downward trend in interest rates.
The National Bank’s solutions have already led to substantially lower deposit and loan rates.Since feb. 25, when the Vietnam National Bank met with banks to request a deposit rate cut, approximately 23 banks have lowered their loan rates.
The National Bank anticipates an average loan rate decrease of 1.3% in 2023, 1.4% in 2024, and a further 0.8% decrease from the beginning of 2025.
The central bank aims to manage the exchange rate and foreign exchange market stably with lower interest rates. Domestic foreign currency resources are currently balanced,with national foreign exchange reserves exceeding $100 billion. The flows of FDI and foreign capital into and out of Vietnam are also relatively balanced.
# Central Bank Signals Potential Shift in Monetary Policy – A Q&A
March 23,2025
## Understanding monetary Policy and Recent Shifts
### What is Monetary Policy?
Monetary policy refers to actions undertaken by a central bank to manipulate the money supply and credit conditions to stimulate or restrain economic activity. This typically involves adjusting interest rates and influencing financial conditions to achieve goals like maximum employment and stable prices.
According to Investopedia, “Monetary policy is a set of tools used by a nation’s central bank to control the overall money supply and promote economic growth and employ strategies such as revising interest rates…”
### What is the current Monetary Policy trend?
Monetary policy is undergoing a global shift towards easing. In Vietnam, experts suggest that the economy requires further stimulus to meet its 2025 growth targets, advocating for bolder measures in monetary policy. One analyst noted the central bank is signaling a relaxation of monetary policy through actions affecting banks and the market.
### How does the National Bank of Vietnam indicate a shift in monetary policy?
The State Bank of Vietnam (SBV) reduced interest rates on government bonds and suspended the issuance of Treasury bonds, which suggests. This suggests the central bank may be allowing interbank interest rates to fluctuate within a lower range, potentially operating between 0-4% instead of a fixed rate during mid-February. Furthermore, the bank has influenced deposit rates, leading to a sharp decline.
### What is the expected impact of these changes?
Experts predict the National Bank will gradually lower interest rates:
* Initial steps will affect credit securities.
* Next, the OMO interest rate will be adjusted.
* Subsequent changes will influence the upper limit of deposit interest rates,especially for terms less than six months.
* more stimulating rates are expected.
### Is a rate cut imminent?
The National Bank has stated its intention to manage credit and monetary policy effectively in 2025, with a credit growth target of 16%. One expert predicts the National Bank will gradually lower interest rates,with the initial step affecting credit securities,followed by the OMO interest rate. Subsequent steps will impact the upper limit of deposit interest rates, especially for terms less than six months, with the overall aim of ensuring bank liquidity and stabilizing interest rates.
### What other measures is the National Bank taking regarding interest rates?
The National Bank plans to utilize refinancing and other tools more flexibly, participating in the banking market to address capital needs. Management has agreed to maintain a stable and downward trend in interest rates,with a target of decreasing loan rates:
* An average loan rate decrease of 1.3% in 2023.
* An average loan rate decrease of 1.4% in 2024.
* A further 0.8% decrease from the beginning of 2025.
### How will this affect the foreign exchange market in Vietnam?
The central bank aims to manage the exchange rate and foreign exchange market stably with lower interest rates. Domestic foreign currency resources are currently balanced, with national foreign exchange reserves exceeding $100 billion. The flowing of FDI and foreign capital into and out of Vietnam are also relatively balanced.
### What factors are influencing these monetary policy decisions?
The decision occur despite certain uncertainties surrounding exchange rates and actions by the Federal Reserve System.Accelerated public investment this year could channel funds back into the system, further supporting banking system liquidity.
### Key Economic Indicators and Targets
| Indicator | Current Status/Target |
| ——————————— | ——————————————— |
| Credit Growth Target (2025) | 16% |
| Foreign Exchange Reserves | Exceeding $100 billion |
| Average Loan Rate Decrease (2023) | 1.3% |
| Average Loan rate Decrease (2024) | 1.4% |
| Further Loan Rate Decrease (2025) | 0.8% from the beginning of 2025. |