Sir, the FED has lowered interest rates, many opinions say that Vietnam has a basis to reduce interest rates accordingly. What do you think about this vacant space?
- The opportunity to reduce interest rates has long been gone. The longer the interest rate is kept too low, the more risks and instability accumulate.
Since the beginning of the year, the FED has lowered interest rates twice. Most recently, on October 30, 2025, they reduced by 25 basis points to 3.75-4%. Whether the Fed will cut interest rates further depends on US inflation data and the US employment report. Regardless of whether the FED will further reduce it in December, the current US target interest rate (3.75-4%) is actually still equivalent to Vietnam's interbank interest rate.
Normally, our interbank interest rates only fluctuate around this level. Only in times of stress at the end of the year, with limited credit, high capital demand, and interest rates, do they increase around 5-6%.
Vietnamese interest rates often have to be higher than international rates. A more risky market, a smaller and weaker economy cannot maintain lower interest rates than the US. International capital flows always to higher and safer interest rates.
Therefore, lower domestic interest rates than international ones will trigger capital flows to move out. This is clearly seen through the fact that foreign investors have net sold more than 5 billion USD on the stock market since the beginning of the year. The same goes for the FDI sector, businesses with large export surpluses will withdraw profits domestically or switch to other markets if domestic interest rates are not attractive enough.
As a result, foreign exchange reserves have decreased, and the State Bank has to sell foreign currency to intervene. The informal market reacted strongly, sometimes the exchange rate approached the 28,000 VND/USD mark.
But inflation according to published data is still low, sir?
- Interest rate policy depends not only on the FED but also on internal health, especially actual domestic inflation.
Interest rates must be higher than those that people deposit, otherwise they will buy gold, real estate, foreign currency, or any asset that increases in price according to inflation. That is the reason why the gold, real estate and foreign currency markets fluctuated strongly.
People are defending against inflation. Official inflation figures are 3.3%, but in reality, essential goods are increasing very rapidly. Many types of essential consumer goods and service prices have increased by several dozen percentage points.
When actual inflation is high, interest rates cannot be lowered. The National Assembly also recently finalized a target of 4.5% inflation, with deposit interest rates not being lower than this level. People will not accept depositing for a 1-2 year term with an interest rate of 4.5% in this context.
If no one deposits long-term money due to low interest rates and high inflation expectations, banks will have difficulty balancing the mobilization term (mainly short-term) and lending term (long-term).
It is worth mentioning that in Vietnam, there is a surplus in real estate loans of major banks. This causes seriousterm imbalances: Banks mobilize for short-term loans but lend for long-term real estate, easily causing risks to the entire system.
So if interest rates are not lowered, what will happen to the asset market and cash flow?
- The inflationary pressure is huge due to the large amount of money pumped out in recent years. The growth of money supply and credit is both at double digits, always waiting for an explosion of inflation and asset prices.
People reacted very clearly: Searching for property to protect value. The most dangerous thing is a property bubble. Keeping interest rates low, asset prices skyrocket. Just with interest rates reduced by 1-2 percentage points, real estate prices can increase by 50%. Since the end of last year, land prices have increased due to the psychology of defending against inflation and speculators taking advantage of cheap capital to hoard goods.
The government wants low interest rates to stimulate growth, but capital flows into real estate. Despite its limited orientation, banks still have many tricks to shift credit rooms (changing the purpose to consumer and production lending). The data of 1/4 of the outstanding debt of the economy is outstanding real estate debt that does not accurately reflect reality, the actual figure may be much higher.
If interest rates increase as you propose, how will assets react?
- Interest rates increase, asset prices certainly decrease. In particular, real estate will decrease rapidly and the most due to high domestic speculation and no international connectivity.
On the contrary, gold will hardly fall sharply because it is anchored to world prices. Securities may be affected somewhat, but the interest rate level is still low compared to history.
Currently, house prices, especially apartments, are "turning around" due to FOMO and speculation. Prices have increased unreasonably for assets with a term of use, while actual supply is gradually increasing.
What recommendations do you have for the coming time?
- Maintaining low interest rates at this time will cause harmful advantages: Causing asset bubbles, increasing the gap between rich and poor and accumulating macro risks.
Deposit interest rates need to be brought to 6-7% so that people can feel secure depositing money in the system, limiting speculative cash flow. Enterprises need more demand and macroeconomic stability than forced cheap interest rates.
It is necessary to impose a strong tax on abandoned real estate, a tax on home ownership for the second and third time, and especially a tax on short-term surfing transactions. At the same time, tax incentives for Science and Technology, green transformation; reduce personal income tax for talents.
We have not used taxes to "stream" cash flow, causing social resources to flow into land speculation instead of production, especially in the context of currency and credit expansion.
In addition, we need to reduce our dependence on bank credit. No economy relies on credit pumping of 15-20% per year, the banking system is increasingly bulging the production sector, but developing sustainably. The capital market needs to be developed so that businesses can mobilize long-term capital from there. SCB's lessons, Van Thinh Phat shows that the risk of bad debt and cross-ownership is always a problem for a credit system that grows too quickly without necessary supervision.
Hopefully, in the coming term, Vietnam will prioritize long-term stability and respect market rules rather than chasing short-term growth figures.
Thank you!
