Closely monitor domestic and international currency movements
In order to support businesses to overcome difficulties, from mid-March until now, the State Bank has reduced operating interest rates three times in a row, since then commercial banks have reduced deposit and lending rates.
SBV Deputy Governor Pham Thanh Ha assessed that the continuous adjustment of the operating interest rates is a flexible solution, suitable to the current market conditions to support the economic growth recovery process according to the guidelines of the National Assembly and the Government, thereby continuing to reduce the market's lending interest rates, increasing the access to capital of businesses and people, contributing to economic growth.
At the same time, the SBV is also one of the first central banks in the world to reduce the operating interest rate in the first months of 2023 to support economic recovery and development.
After 3 times of continuous reduction by the State Bank, the VND interest rate is expected to continue to decrease. However, everything has to "look" at the Fed. Illustration
"In the coming time, the SBV will continue to closely monitor domestic and international monetary developments, forecast inflation and market interest rates to adjust interest rates in line with the macro balance, inflation and monetary policy objectives," the SBV Deputy Governor emphasized.
According to Mr. Pham Thanh Ha, the State Bank will continue to have solutions to encourage credit institutions to reduce costs to reduce lending interest rates in order to support businesses to recover and develop production and business.
However, the Deputy Governor also said that the remaining months of 2023 are forecast to continue to have many challenges with monetary policy management due to complicated developments of both the world and domestic economies.
The world economy is expected to slow down with many uncertainties, although inflation has shown signs of overtaking but will continue to remain at high levels in many countries, many central banks still maintain high interest rates, and world commodity prices have many potential risks of sharp fluctuations.
Meanwhile, domestic economic growth is also facing increasing risks when world demand declines, negatively affecting manufacturing and processing industries, inflation pressure remains, investment and consumption activities also face many difficulties.
Accordingly, the SBV continues to closely monitor economic and monetary developments at home and abroad, firmly, proactively and flexibly administering monetary policy tools to contribute to controlling inflation, supporting economic growth, and stabilizing the currency and foreign exchange markets.
It can be seen that the interest rate policy will depend greatly on the international situation. But at the international level, the move on interest rates of the Fed has the strongest impact on the monetary policy of many countries.
The Fed pause does not mean the rate hike is over
With Congress passing a debt cap deal and the latest jobs report looking strong, the market doesn't rule out another rate hike this summer, despite the possibility of a June Fed pause, according to analysts, according to analysts.
The debt ceiling deadlock ended before it did too much damage, with the House and Senate passing the deal.
The Fed pause in June doesn't mean the rate hike is over. Illustration
And Friday's resilient jobs data from April delayed impending recession fears, giving the Fed the ability to keep rates higher for longer.
Analysts are still expecting the Fed to pause its rate hike cycle at its June 13-14 meeting due to a few dovish Fed speakers this week. But another rate hike later this summer is not ruled out.
Sean Lusk, co-director of Walsh Trading, told Kitco News: “The debt ceiling issue has been resolved. And the employment numbers tell us that things are getting a little better, which can be seen as inflation. It makes the Fed more hawkish.”
The good news is that the Fed won't want to shock the market, Gainesville Coins precious metals expert Everett Millman told Kitco News.
“There is an argument to be made that the Fed should continue to raise rates given strong economic data. But given the lingering problems in the financial system, I don't see why it would raise interest rates and surprise the market," he said. “So far, the Fed has managed to soften the impact of the rate hike with clear signals.”
According to the CME FedWatch Tool, markets are pricing in a 70% chance that interest rates will pause at the June meeting.
Markets will be closely watching the May inflation report, due on June 5 – just before the Fed rate decision.
Michael Boutros, senior technical strategist at Forex.com told Kitco News: “The Fed's outlook is to stay higher for longer. Even if the Fed skips the rate hike in June, then rates could still increase by 6 percentage points.”
