MONETARY MARKET UPDATE FEB 2025: STABILIZE TOWARDS THE END OF THE MONTH
Net withdrawal was the dominant trend in the open market in February due to a large amount of maturing from the forward contract channel. From 01-21/02/25, the SBV net withdrew about VND38.0 trillion in the open market.Overnight lending rates in the interbank market increased sharply in the first half of the month but then stabilized. On 21/02, the VND overnight lending rate was 3.98%/year, unchanged from the end of January.
The USD has not been able to increase since Trump took office and has had a similar adjustment rhythm to the Trump 1.0 period. Uncertainty in tariff policy will remain high while tariff plans will likely be finalized in the coming months. Along with that, the Fed's cautious policy stance on implementing further interest rate cuts will likely continue to support the US dollar.
The most notable development in the USD/VND exchange rate in the past month was the SBV's continuous adjustment of the central exchange rate and changes in the USD buying and selling prices. This implies that the SBV is choosing a more market-oriented and flexible approach to exchange rate management, which can be considered a measure to preserve foreign exchange reserves.
Some directions for monetary policy management in 2025:
The SBV has raised the credit growth target to 16%, higher than the 15.1% increase in 2024.
The Government's loosening of the inflation target to 4.5-5.0% may indirectly affect the direction of money supply/credit management in 2025.
The management of interest rate and exchange rate is considered a challenging task.
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