Rates stable despite US Federal Reserve rate hike

As expected, the US Federal Reserve by late last week increased the interest rate for the fourth time this year by 25 basis points from 1.75% to 2%. The move is attributed that the US economy has recently regained significant recovery however sharp swings of oil prices and the world political problems allowed the US Federal Reserve cautiously raise the interest rate. If the US’s economy positively goes on like this, it is expected that the US Federal Reserve will further increase the interest rate once more by mid-December.
Despite the US Federal Reserve’s interest rate hike, domestic credit market is still relatively stable because commercial banks have foreseen this move, they had adjusted their interest rates before that. Hoang Hong Hanh, head of the Vietcombank’s capital department said “this was not the surprising news for domestic banks. The US Federal Reserve’s interest rate increase was anticipated by commercial banks thereby they made certain adjustments. Presently, the interest rate for 12 month US dollar deposits of Vietcombank is 2.2% per year.” “So far, Vietcombank’s capital is still stable, there is no changes in supply-demand, so there will no adjustments in interest rates,” Hanh added.
As for commercial joint stock banks, interest rate level remains relatively stable at 2.3-2.6% per year for 12 month terms. Before the US Federal Reserve announced to raised the interest rate, only Hanoi Housing Development Commercial Joint Stock Bank (Habubank) followed suit, that is, increasing foreign currency interest rate by 0.2-0.35% per year based on different terms. Nevertheless, the new interest rate level is equal to the common interest rate, namely, the 12 month US dollar deposits carry an interest rate of 2.5% per year.
It is anticipated that domestic commercial banks in the near future will not significantly raise foreign currency interest rates. However if the US Federal Reserve continues to edge up the base interest rate in December as expected to 2.25% a year, domestic commercial banks are likely then to have to follow suit. That will also be the sensitive time for the foreign currency market because this time is the end of year and loan demand heightens and overseas remittances transmitted back to Vietnam also rise significantly.

 

Category: Finance