Vietnam central bank to cut key interest rates to aid growth

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Vietnam said it would cut its benchmark interest rates in the "next few days" to shield growth amid a slowing global economy and after consumer prices rose the least in 11 months in February.

The State Bank of Vietnam will reduce the repurchase rate and refinancing rate by 1 percentage point each, central bank Governor Nguyen Van Binh said Tuesday in Hanoi. The repurchase rate for the seven-day term is currently 14 percent and the refinancing rate is 15 percent. It will also lower the maximum interest rate banks can pay for deposits in dong, Binh said. The rate is now at 14 percent.

The central bank last cut the repurchase rate in July and the refinancing rate in 2009, while policy makers from Indonesia to the Philippines have reduced borrowing costs this year to spur their economies. Vietnam still has the fastest inflation among 17 Asia-Pacific economies tracked by Bloomberg, and consumer prices rose 1.37 percent last month from January.

"Vietnam has a history of easing early in the inflation cycle," said Matt Hildebrandt, a Singapore-based economist at JPMorgan Chase & Co. "Inflation is probably going to slow to single-digits by mid-year, and I don't think these cuts will change that. But I would have liked to see them wait until the second quarter."

Improved economic data and better bank liquidity will pave the way for the cuts, Binh said. Inflation slowed to 16.44 percent in February from 23.02 percent in August 2011.

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