Vietnam cuts key rates for 4th time this year as inflation cools

Vietnam cuts key rates for 4th time this year as inflation cools

Vietnam's central bank said on Friday it will cut key policy rates by up to two percentage points next week, the fourth time it has eased policy this year to help spur flagging economic growth.

Effective on Monday, the refinance rate will be cut to 11 percent from 12 percent, the discount rate to 9 percent from 10 percent and the ceiling on dong deposit rates to 9 percent from 11 percent, the State Bank of Vietnam said in a statement one day after China announced surprised rate cuts to combat faltering growth.

The lower rates come as inflation is moderating and the banking system's funding situation is improving, the statement said.

Vietnam's inflation rate, which was among the highest in Asia last year, has fallen below 10 percent for the first time since October 2010, with prices in May rising 8.34 percent in May from a year earlier.

As price pressures eased and the global economic outlook worsened, the central bank has quickened the pace of its policy easing. It last cut rates on May 28.

The government has shifted its priorities from inflation to stimulating growth after gross domestic product expanded by 4 percent in the first quarter, the slowest rate in three years, analysts said.

Around 53,800 businesses in Vietnam went bankrupt or ceased operating last year, up nearly 25 percent from 2010, while another 14,000 ceased operations in the first quarter of this year, up by 9 percent from the same period last year, the National Assembly's economic committee said in a report on May 18.

The banking system has ample funds but businesses, facing a cash squeeze, cannot get loans due to worries about bad debts and high inventories, state media has quoted Le Xuan Nghia, a member of the National Monetary Advisory Council, as saying.

Reuters