Interest rates

US Fed raises interest rates, SBV gives exchange rate message

The State Bank of Vietnam (SBV) affirmed that it will apply a flexible monetary policy in the face of global uncertainties

Since the beginning of 2022, the international financial market has been experiencing complicated movements. Tensions between Russia and Ukraine have had a negative impact on the global economic and financial system, affecting fuel and commodity prices, and exacerbating the consequences of disrupted global supply chains.

The greenback price is now at an all-time high following the US Fed’s decision to raise the interest rate by 75 basis points last week. This is the third time the Fed has raised interest rates this year, and the 75 basis point increase is the largest in 28 years.

Meanwhile, a Fed (Federal Reserve) official argued for another 75 basis point increase in July.

The currencies of major economies lost value following the Fed’s decision.

A number of central banks also raised their interest rates. The UK central bank, for example, raised the interest rate for the fifth consecutive time, while the Swiss central bank raised the interest rate for the first time in the last 15 years.

Meanwhile, the European Central Bank (ECB) has confirmed that it will stop buying bonds from July 1 after enforcing the policy for nearly a decade. It also signaled that it would raise interest rates starting in early July.

Under such conditions, many securities companies in Vietnam believe that the SBV should increase the interest rate by 0.5%. Meanwhile, some analysts believe there will be no big changes in central bank monetary policy.

Analysts say that although the international market fluctuates, the domestic forex market has stable liquidity. The dong/dollar exchange rate did not experience a downward trend like in 2021, but increased by 2% compared to the end of 2021.

Pham Chi Quang, deputy director of the monetary policy department of the SBV, said the central bank will follow a flexible policy, to conform to the global market, and intervene if necessary to mitigate the consequences of exchange rate fluctuations and to stabilize the foreign exchange market.

Quang said that since the beginning of 2022, the central bank has been selling foreign currency to intervene in the market at a reasonable level and supplement supply, thereby satisfying the demand for foreign currency and at the same time maintaining high liquidity in dong. Vietnamese who can help stabilize the interest of the dong. rates.

The dollar price on the black market is closer to the threshold of 24,000 VND per dollar. On June 19, the prices were 23,920 VND (buy) and 23,950 VND (sell).

Gia Hung