Hanoi, Mar 15 (IANS): The State Bank of Vietnam has said it would cut its policy rates by 100 basis points from Wednesday to address the liquidity problem for households and businesses.

The discount rate will be cut to 3.5 per cent from 4.5 per cent, the interbank overnight lending rate to 6 per cent from 7 per cent, while the refinancing rate will be kept unchanged at 6 per cent, the central bank said on Tuesday in a statement posted on its website.

The central bank will also cap bank dong loan rates at 5 per cent, down from 5.5 per cent, Xinhua news agency reported.

The move is part of the government's effort to "disentangle difficulties that have arisen in the economy, cutting lending rates for businesses and households", the central bank said.

The central bank's last cut of the rates was in 2020 to support the economy through the Covid-19 pandemic.

Last year, as Vietnam was faced with upward pressure on inflation and downward pressure on its currency, the central bank, taking similar steps by policymakers around the world, raised policy rates in September and widened the exchange rate trading band in October.

Vietnam will try to keep its economic growth at 6.5 per cent this year, backed by public investment, foreign direct investment, exports and domestic consumption.

Consumer price index in February rose 4.31 per cent from a year ago and 0.97 per cent higher than the end of last year, the government is striving for the targeted 4.5 per cent for the year.