Domestic commercial bank rates remained unchanged despite a US Federal Reserve (Fed) decision to raise interest rates a quarter percentage point on Tuesday.
Many Vietnamese experts are concerned that the Fed’s decision to raise rates, the second time since July, may pressure domestic banks, to raise their own dollar interest rates.
However, many banks said they would not follow the Fed right away, explaining that if they raise their rates people will switch their deposits from dong to US dollar thereby creating a potential dong shortage.
Recently many Vietnamese have begun depositing money in US dollar accounts as the country’s consumer price index has steadily risen since the beginning of this year. The index in the first seven months of 2004 rose by 7.7 per cent.
Director of the Technological and Commercial Joint Stock Bank Nguyen Duc Vinh said his bank would not adjust interest rates as they were at a reasonable level.
"The Fed’s decision was expected and does not effect domestic banks’ rate policies. As for our bank, we have obtained our deposit target at the current rate level, so there’s no need for us to take action at the moment," Vinh said.
Immediately after the Fed raised interest rates to 1.25 per cent on July 1, many private banks including Techcombank, Asia Commercial Bank and Sai Gon Thuong Tin Commercial Joint Stock Bank announced rate rises on dollar accounts of between 0.1 and 0.4 per cent annually.
The US dollar increased 4 dong on Wednesday, trading at 15,763.
The Euro fell 1.7 per cent to close at 19,116.Gold also declined by VND10,000 per tael, to VND7.67 million.
VNCG-VDC1 - (13/08/2004)