The central bank could raise its benchmark interest rate in the fourth quarter of 2022

VIETNAM, July 12 –

HÀ NỘI — The State Bank of Vietnam (SBV) will do its utmost not to tighten monetary policy immediately to support economic recovery and stabilize the market, according to analysts at VNDirect Securities Company.

In a recently published report, analysts said that if there was a benchmark interest rate increase this year, it would likely take place in the fourth quarter of 2022 and the increase would be limited to around 0.25-0. .5 percentage points.

Higher-than-expected inflation in Việt Nam could hamper the country’s economic growth and lead to a tightening of monetary policy, analysts say. In the current context, the SBV has less leeway to maintain an accommodative monetary policy to support the economy.

However, analysts believe that the SBV will not tighten monetary policy. They explained that although inflationary pressure is expected to increase in the coming months, the average consumer price index in the first half of 2022 is expected to increase by 2.5% year-on-year, still well below the 4% ceiling. targeted. by the government for 2022.

In addition, domestic demand is still relatively weak and has not fully returned to normal levels as before the pandemic.

Additionally, the SBV is still prioritizing the goal of keeping lending rates low to help businesses and the economy recover from the pandemic, analysts said.

VNDirect predicts that the increase in interest rates on deposits will slow in the third quarter of 2022 due to weak demand after many commercial banks temporarily used up all their credit growth quota. However, interest rates on deposits could accelerate again in the fourth quarter of 2022 after the SBV increases the credit growth quota for commercial banks.

They expected the interest rate on deposits to rise by 0.3 to 0.5 percentage points in the second half of 2022, during which the 12-month term deposit rate could reach around 5.9-6.1% per year on average by the end of 2022, still below the pre-pandemic level of around 7.0% per year.

Regarding interest rates on loans, VNDirect expects that the interest rate incentive program can help reduce the average interest rate on loans by 20 to 40 basis points. in 2022. However, he noted that the actual impact of the program’s interest rate reduction on businesses and the economy could be lower if commercial banks raise lending rates on other conventional loans to offset the increase in interest rates on deposits.

According to the report, VNDirect reported that the Vietnamese đồng depreciated 1.6% against the US dollar as the greenback hit a 20-year high.

However, VNDirect analysts saw a number of factors supporting the đồng in the second half of 2022, including the improvement in the trade surplus (expected to reach US$7.2 billion in 2022), the excess balance payments and the increase in foreign exchange reserves from 120 to 122 billion dollars (equivalent to 3.9 months of imports).

The USD/VNĐ exchange rate will fluctuate between 22,900 and 23,300 VNĐ per dollar by the end of 2022, an increase of no more than 2% compared to the end of 2021, according to VNDirect’s forecast. —VNS