

Late yesterday (March 22) the Fed raised interest rates for the 9th time since the beginning of last year, increasing by 0.25 percentage points, so the current overnight lending rate of the Fed is 4.75-5%. This interest rate hike was as expected by most investors and experts. However, there are still opinions that the Fed continues its “hawkish” stance (tightening monetary policy to control inflation) despite the recent turmoil in the banking market in the US and Switzerland.
The reality is that’s not the case. The Fed’s interest rate hike this time is a necessary step, calculated very carefully, in a multi-dimensional, multi-targeted manner. Specifically, this decision helps the Fed achieve at least 3 goals : (i) continue to be consistent in the fight against inflation (despite adjustments) because inflation is still high (overall inflation is still 6). % of February 2023 compared to the same period last year; inflation taking into account spending sentiment – PCE still increased by 5.4% over the same period) and far from the target of 2%; (ii) also took into account the recent US and global banking market turmoil (so the Fed raised less than some previous 0.5 percentage points forecasts), even if the Fed did not raise interest rate this time can give a signal of “unstable” market; making investors can react differently, more confused; (iii) to protect the policy credibility of the Fed.
The US stock market dropped this endpoint (about 1.6%), showing that many investors are still concerned about the impact of rising interest rates on the economy and financial markets (including risks to with the US and European banking systems, etc.), although they have been controlled to some extent. Another reason is that the market was also affected by the comment of Treasury Secretary Janet Yellen that currently the US does not have a comprehensive insurance regime for deposits at banks during the hearing with the Subcommittee on International Banking. American Society at the same time.
That is also a factor that the Fed has been considering. Accordingly, the Fed has also changed its stance towards being less hawkish and more flexible. Minutes of the meeting showed that the Fed not only had an anti-inflation target, but also took into account financial “market conditions”, in addition to the employment factor as always. Accordingly, it is highly likely that the Fed will only raise interest rates one more time (about 0.25% in the next meeting or in June 2023).
For Vietnam , the Fed’s interest rate increase this time is also in the forecast, in the calculations of the regulator and investors, so the impact will be negligible. The problem is that the sentiment and reaction of investors and depositors in the US and globally in the coming days may still be mixed, having a certain impact on the Vietnamese financial market. Anyway, interest rate and exchange rate pressure has decreased a lot compared to the end of 2022 and the beginning of this year.
However, with drastic and quick policy moves, unprecedented consensus, strong communication by US and Swiss officials in recent days, along with the Fed’s monetary policy adjustment, and the US and European banking system foundation is much more solid than in the previous crisis period, hoping that the US and European economies and financial markets can “soft land”, overcome The current shock is well-founded.
Dr. Can Van Luc/Market life