Interest rates remain stable, credit will increase by 18

Mr. Dinh Duc Quang, Director of Currency Trading Division (UOB Bank Vietnam)

The Fed has just decided to keep interest rates unchanged. What do you think about the “health” of the USD for the rest of the year?

At the meeting on July 30, 2025, the Fed decided to keep the federal funds rate in the target range of 4.25 - 4.5%.

After the meeting, the Fed Chairman held a press conference to further explain this decision, stating that the US economy continued to grow steadily (up 3% in the second quarter of 2025) despite the impact of tariffs, the unemployment rate was low while inflation slightly exceeded the 2% target. The Fed believes that interest rate policy is still on track and needs more data to consider the interest rate decision in the last months of 2025. The Fed Chairman has not yet given a firm forecast for the direction of interest rate management in the September 2025 meeting.

With this latest development, the USD has increased quite strongly compared to other strong currencies, the USD Index is returning to 100 - the highest level in the past 3 months. The market has also started trading exchange rates of major currency pairs, interest rates, gold... at prices with the calculation that the possibility of the Fed deciding to cut interest rates in September is less than 50%.

Thus, it is likely that USD interest rates will continue to be anchored at a high level, averaging over 4% in the remaining months of 2025, although we maintain the view that the Fed will still have 2-3 interest rate cuts in the last months of the year, with a total reduction of about 0.5-0.75%.

In your opinion, will the slow decrease in USD interest rates create pressure on VND exchange rates and interest rates?

The Fed’s slow rate cut is also one of the factors that continues to put pressure on expectations that VND interest rates will be cut to support production and business activities and promote growth. High USD interest rates will also continue to attract holdings of this currency in the US and around the world , thereby continuing to cause difficulties in implementing monetary policies to ensure stable VND/USD exchange rate and expand foreign exchange reserves.

According to the UOB Bank research team, the State Bank of Vietnam (SBV) will not temporarily adjust the VND policy interest rates in the short term, but will continue to monitor domestic macroeconomic developments, USD interest rate trends and the impacts of the new US tariff policy, from which it will make decisions on VND interest rates. If USD interest rates are cut in the September Fed meeting and there is a clearer downward trend in the fourth quarter of 2025 and the first quarter of 2026, we believe that the SBV will adjust VND interest rates down by about 0.5%.

UOB Bank's research team forecasts that in the third quarter of 2025, the VND/USD exchange rate will continue to trade at a high level in the range of 26,400 - 26,500 VND/USD and will decrease slightly to around 26,000 VND/USD by the end of 2025 and early 2026.

From now until the end of the year, will lending interest rates decrease further to stimulate credit demand, sir?

Based on the above analysis, we see that the possibility of commercial banks sharply reducing deposit interest rates and VND lending interest rates in the last months of the year is not high. The VND deposit interest rate in August 2025 is about 0.2 - 0.4% lower than the same period in 2024, depending on the term, consistent with the overall correlation with USD interest rates and fluctuations in the VND/USD exchange rate in recent months. At this interest rate, the market also recorded high credit growth (nearly 10%) in the first 6 months of the year and the whole year of 2025 could reach 18 - 20%. This is a strong supporting factor for economic growth.

In the most optimistic scenario, when USD interest rates decrease by the end of the year, the tariff impact is small and the upgraded stock market attracts strong foreign capital flows, it is possible to expect VND interest rates to decrease more sharply, thereby positively affecting the economic growth plan in 2026.

Source: https://baodautu.vn/mat-bang-lai-suat-giu-on-dinh-tin-dung-se-tang-18---20-d347558.html