Fed cuts interest rates by 0.25%, how does it affect Vietnam's economy?

According to many experts, the Fed’s move will help reduce pressure on the global financial market, including Vietnam. This is also a positive signal for Vietnam to attract foreign capital with attractive interest rates, contributing to helping businesses recover and expand production and business at the end of the year.

Associate Professor Dr. Tran Hoang Ngan analyzed: The Fed's interest rate cut of 25 percentage points (0.25%) was predicted and is also the common wish of countries around the world . "The US has maintained high interest rates since December 2024, so countries are looking forward to this interest rate cut. For the US, this move will support their own economy, which is facing difficulties when facing rising unemployment. Therefore, the Fed has enough basis to reduce interest rates and in my opinion, it will reduce them further in the near future," Mr. Ngan said.

Regarding the global financial system, including Vietnam, Mr. Ngan said that it will also be positively affected because the USD is a popular currency: " In the short term, this will affect the exchange rate, reducing the pressure on high exchange rates, thereby contributing to stabilizing the macro economy and reducing the interest rate of the Vietnamese Dong in the coming time. This is a very positive signal."

According to experts, the Fed's interest rate cut will help reduce pressure on global financial markets, including Vietnam.

Sharing the same view, Associate Professor Dr. Dinh Trong Thinh commented that the Fed's interest rate cut will mainly have positive impacts on Vietnam's exchange rate, interest rate, and import and export.

Firstly, the Fed’s interest rate cut will stimulate consumption, investment, production and business of American businesses and people, thereby boosting Vietnam’s exports to this market. At the same time, it will push FDI capital flows into emerging markets, including Vietnam.

Second, the USD will depreciate, reducing pressure on the USD/VND exchange rate. The cooling exchange rate will contribute to reducing import costs.

Third, the Fed’s move will contribute to reducing the cost of debt capital and foreign currency investment for enterprises in Vietnam. In addition, the cost of borrowing capital for the Government and FDI enterprises in foreign currency will also decrease somewhat.

Fourth, the Fed's interest rate cut will have a positive impact on the stock market and investment capital flows, especially foreign indirect investment.

Also commenting on this issue, economic expert Nguyen Quang Huy said that the Fed's 25 basis point cut and the possibility of two more cuts this year signal a global financial easing cycle.

“This is not simply a technical change but a message of change, showing that international capital costs are entering a “softer” phase. For emerging economies like Vietnam, this is a “window of opportunity” to stabilize exchange rates and expand growth space,” Mr. Huy said.

In a more specific analysis, Mr. Huy said that in the context of the Fed reducing interest rates, the USD and global interest rates will "cool down", helping to reduce the pressure to maintain high domestic interest rates.

“Banks will have the conditions to lower lending rates, thereby stimulating both credit supply and demand. Low yield levels often encourage capital flows to potential markets. In addition, abundant liquidity will strengthen the foundation of the banking system, creating favorable conditions for credit expansion,” Mr. Huy commented.

In terms of psychology and expectations, Mr. Huy said that when borrowing costs decrease, businesses and households tend to boldly borrow capital to expand production, business, investment and consumption.

“Expectations of stable or further reduction in interest rates will boost demand for loans soon. In addition, manufacturing and export enterprises can also take advantage of cheap capital to expand capacity and supplement working capital. Real estate and infrastructure will also have increased capital demand when interest rates are lower, especially in the context of public investment being promoted. In addition, household consumption such as loans to buy houses, cars, and consumer goods may be active again,” Mr. Huy predicted.

From the perspective of credit supply, Mr. Huy believes that commercial banks will have the conditions to loosen credit standards and expand lending. However, Mr. Huy recommends that the benefits of cheap capital are only sustainable if linked to monetary, exchange rate and inflation stability. Therefore, we should encourage capital flows into production, technological innovation and industries that support long-term growth. In addition, we need to coordinate monetary and fiscal policies and institutional reforms to turn the “favorable window” into a sustainable driving force, while using monitoring tools to ensure credit expansion but quality is still controlled.

“In other words, the Fed opens a “cheap capital window,” but whether Vietnam can turn it into a long-term growth lever depends on how we shape the credit flow today,” Mr. Huy said.

The US Federal Reserve (Fed) has approved a decision to cut interest rates for the first time in nine months, while signaling two more cuts before the end of the year.
Accordingly, the Federal Open Market Committee (FOMC) - the Fed's policy-making body - voted 11-1, less dissent than Wall Street expected, to cut lending rates by 0.25 percentage points, and is expected to make two more cuts this year.
Fed Chairman Jerome Powell said the move was a "risk management" measure in the face of a weakening labor market and stressed that the Fed was in "no rush" to ease further.
This is the first rate cut by the FOMC since December last year, bringing the interest rate range down to 4.00% - 4.25%.

PHAM DUY

Source: https://vtcnews.vn/fed-giam-lai-suat-0-25-tac-dong-the-nao-den-kinh-te-viet-nam-ar966074.html