Vietnam's central bank cut its benchmark refinancing rate by 100 basis points to 9.0 percent, saying inflation is at a low level but production and business conditions are difficult, inventory levels are high and the absorption of corporate bank credit remains limited.
The State Bank of Vietnam, which has cut rates by 600 basis points this year, said the bank's rediscount rate would also be cut by 100 basis points to 7.0 percent and overnight rates in the interbank market would be cut to 10 percent from 11 percent.
The central bank said the consumer price index rose by 0.47 percent in November for an increase of 6.52 percent from the end of 2011 with the 2012 inflation rate expected to be about 7 percent.
In 2011 Vietnam's inflation rate was 18.7 percent.
The bank said the liquidity of the banking system had improved, foreign exchange reserves had increased, interbank market rates had decreased and the exchange rate was stable.
Earlier this month, Vietnam's prime minister told a newspaper that there were sufficient reasons to lower interest rates as inflation had been easing in recent months. He also said that full-year inflation would be around 7 percent this year, below the government's previous estimate of 7.5 percent.
In the third quarter, Vietnam's Gross Domestic Product expanded by an annual 4.8 percent, up from 4.45 percent in the second quarter.
In 2011 Vietnam's GDP expanded by 5.9 percent and the International Monetary Fund forecast in October that growth would slow to 5.1 percent this year.