As the US Federal Reserve's interest rate hike schedule gradually decelerates, the attractiveness of the US dollar diminishes, leading to a progressively reduced impact on the domestic exchange rate. (Photo: Vietnam+)
Hanoi (VNA) - The State Bank of Vietnam remains steadfast in implementing a flexible and effective monetary policy to curb inflation, stabilize the currency, and ensure macroeconomic stability.
In a recent decision, the US Federal Reserve (Fed) raised its benchmark interest rate by 0.25 percentage points, reaching 4.5%-4.75%, the highest level since October 2007. Indications also suggest that the Fed may soon conclude its current cycle of tightening monetary policy.
However, domestic experts have largely anticipated the rate increase, resulting in minimal concerns.
Historical data reveals that the Fed had previously raised interest rates by 0.75% in two consecutive adjustments, causing market fluctuations, including those in Vietnam.
Looking ahead to 2023, the Fed's interest rate forecast is projected to hover around 5% or slightly higher.
Distinguished economic expert, Associate Professor, Dr. Dinh Trong Thinh, assured the stability of the Vietnamese dong against the USD remains intact, providing robust support for economic activities and fostering growth.
Exporters, meanwhile, welcome the appreciation of the US dollar against the Vietnamese currency, as it bolsters their trading prospects.
The leader of the Tien Son Garment Corporation emphasized that the majority of the company's exports are directed towards the US, resulting in transactions being conducted in US dollars. Hence, the appreciation of the USD is viewed as advantageous to the company.
Production of textiles at the enterprise (Photo: Vietnam+)
Conversely, the USD's appreciation poses challenges for importers, as it elevates the costs of importing raw materials.
Notably, industries such as animal feed producers and energy businesses are among the most adversely affected by these exchange rate fluctuations.
Furthermore, electronic goods, contributing significantly to Vietnam's GDP and are heavily reliant on imported raw materials, thus these items will also experience repercussions.
Projections for 2022 indicate an increase in Vietnam's trade deficit for key markets, including China (up 11.5%), the Republic of Korea (up by 11.5%), and ASEAN (up by 10.6%).
Additionally, the Fed's interest rate hike is expected to curtail borrowing capacity and resilience for Vietnam businesses, potentially impacting their ability to attract foreign direct investment.
Dr. Do Hoai Linh, Deputy Head of the Department of Commercial Banking at the National Economics University, contends that the Fed's interest rate increase does not come as a surprise.
"We have fully anticipated and carefully considered this development. I believe that this move will have a limited impact on the management and implementation of monetary policy in the current context," remarked Linh.
In the domestic market, interest rates have cooled since the Lunar New Year, declining by 0.1%-1% per year compared to the previous year. However, a considerable number of individuals continued to deposit funds into banks at the onset of the year, contributing to maintaining liquidity.
State Bank of Vietnam headquarters. (Photo: Vietnam+)
Looking forward to 2023, analysts at several securities companies anticipate a gradual decline in interest rates, particularly in the latter half of the year.
Standing Deputy Governor of the State Bank, Dao Minh Tu, emphasized the central bank's unwavering commitment to a flexible, effective and timely monetary policy.
The State Bank's primary objective is to maintain a flexible and prudent approach in determining and managing exchange rates, interest rates, and money supply, all while ensuring inflation control, currency stabilization, macroeconomic balance, and sustainable economic growth, stated Mr. Tu./.
