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How high will the basic interest rate be for Sep?
People are trying to guess about how high the basic interest rate for September will be. It is a surety that the rate will not be higher than that of August, so two scenarios are possible: either the rate will decrease a little, or it will remain unchanged.
People have every reason to expect the State Bank of Vietnam will announce a higher basic interest rate for September. The CPI increased slightly by 1.56% only in August. The liquidity of the banking system has improved. Deposit interest rates have been decreasing, while the trade deficit has also been eased.
However, it is not very likely that the State Bank will announce a lower basic interest rate for September. Though the CPI increase was lower than expected (1.56% vs 2%), it was still higher than that of July. The CPI through August has increased by 21.65% over the end of the last year.
Meanwhile, the CPI increase still does not reflect all the possible impacts of the petrol price increase, because petrol-related commodities just account for a small proportion in the basket of commodities serving the CPI calculation. At this moment, curbing inflation with tightened monetary policies remains the top priority task of the government.
The oil price in the world is decreasing, but the oil market remains volatile, especially as the US, the leading economy in the world, is facing a lot of challenges. The difficulties of the US economy will surely have bad impacts on the global economies, including Asia and Vietnam.
Securities investors really expect a decrease of the basic interest rate for September as they think that the stock market’s recovery will heavily depend on the interest rate policy. However, bankers say that a basic interest rate decrease, though having some impacts on the psychology of investors in the short term, would not have big impacts on VND commercial interest rates.
Lending interest rates remain at high levels even though some state-owned banks have announced interest rates lower by 1% per annum. Most joint-stock banks are now still lending at 21% per annum, which is considered overly high for clients.
There is a strange thing that while many domestic experts think that it is now the right time to slash the basic interest rate, foreign institutions believe that Vietnam still needs to maintain the tightened monetary policies. They said that Vietnam should raise the basic interest rate in order to restrain credit growth and help improve the capital allocation in the national economy.
Standard Chartered, in a recent report, also said that though Vietnam has experienced a lot of difficulties, it still needs to keep tightening the monetary policies in order to stabilise the market.
How high the basic interest rate will be for September remains unknown. However, experts believe that the central bank will be cautious with the monetary policies and will not reduce the basic interest rate, or reduce it by 0.5% per annum only. A sharper adjustment of the basic interest rate may be considered in the last months of 2008 or in early 2009.
VNN
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