Banks raise deposit rates on inflation prospects

TN News

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Several commercial banks have exceeded the 11.5 percent interest rate cap on dong deposits imposed by the national banking association on expectations inflation will stay high this year.

The banks, including Asia Commercial Bank, Eximbank and Saigon Commercial Bank, have, over the past two weeks, raised their deposit interest rates to between 11.6-11.8 percent.

Economist Vo Tri Thanh of the Central Economic Research and Management Institute said deposit rates were raised because inflation is expected to surge after the government revised this year's inflation target to 8 percent from the previous 7 percent.

In such a situation, many people want to wait for banks to raise interest rates before they start depositing money, Thanh said. As a result, banks have to actually raise interest rates, fueling expectations of further hikes.

Inflation expectations need to be well anchored and the government has to ensure that inflation can be kept at 8 percent, Thanh said. The government also needs to take measures to cut trade and budget deficits and increase the efficiency of capital use.

When the economy improves and the local currency becomes stronger, interest rates will fall and the goal to keep lending rates at 12 percent and deposit rates at 10 percent can be realized by the end of this year, he said.

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