Hanoi (VNA) – The Singapore-based UnitedOverseas Bank (UOB) anticipates the State Bank of Vietnam (SBV) willcut its refinance rate in t🧔he second quarter this year by 100 basispoints to 5.00%.

“With the US Fed poised to end its rate hike cycle as soon as May 2023 and that domestic inflation rates are showing some tentative signs of turning, we anticipate that the SBV will cut its refinance rate sometime in the second quarter this year by 100bps to 5.00%,” UOB’s report emphasised.  According to the bank's newly-released report on global economic outlook, that could be a one-off move, andmore rate cuts may be on tap if domestic price pressures ease off further,although this is highly uncertain for now. From September to November last year, the SBV embarked on aflurry of policy moves given aggressive US Fed interest rate hikes, USDstrength, and inflation pressures. It then unexpectedly raised its keyinterest rates by 100 basis points on 22 September, followed by another roundof 100 bps hike a month later on 24 October.  The SBV on 17 October announced the widening of theUSD/VND trading bands to /-5% from /-3% to allow for greater flexibility forthe VND given a strong USD. On 16 March this year, the SBV unexpectedly lowered itsdiscount rate by 100bps to 3.5% from 4.5% in an attempt to boost economicgrowth amid global uncertainties. The US and European banking sectors aremired in a crisis of confidence. The SBV also reduced the overnight lending rate inthe interbank market by 100bps to 6% and trimmed the cap on the lendinginterest rates for short-term loans in some sectors to 5% from 5.5%. According to the UOB, the most important part of the latestpolicy move was that the SBV left the refinancing rate unchanged at 6%. Thissignals that the policy stance remains unchanged despite cuts in other interestrates. As the SBV balances economic growth while ensuring pricestability, there will be an increasing bias to shift towards a more accommodating stance ahead.  Experts from UOB forecast Vietnam’s GDP growth will reach 6.6% this year in line with the target of 6.5% by the government. This takes into account the first quarter growth momentumto pick up slightly at 6.45% year over year, largely due to the low base in2022.  According to the bank, several external risks continue toweigh on its outlook including the Russia-Ukraine conflict and its impact onenergy, food, and commodity prices; global supply chain shifts and disruptions;global monetary policy tightening; and the developments in the global bankingsector with its impact on confidence. Consumer prices are showing tentative signs of turningaround, however it is still early to tell whether the trend is sustainable. Ofconcern is that core inflation remains well above the overall target, whichwill be a key consideration for the central bank, the bank suggested./.