The second such rate cut in two weeks was announced late Monday in an online statement by the State Bank of Vietnam (SBV).

The move aimed 'to avoid a slowdown of the economy and to stabilise the macro-economy' while keeping inflation in check, the bank said.

The monetary loosening since last month reverses a series of three rate hikes earlier this year, from 8.25 per cent to 14 per cent.

Those increases had aimed to control inflation, which last month fell slightly to 26.7 per cent, but the rate cuts since have aimed to stimulate the economy amid a domestic credit crunch and the global financial turmoil.

Vietnam, a major producer of manufactured goods such as garments and footwear, and commodities including rice, coffee and seafood, could be hit hard by downturns in the United States, Europe and other export markets.

The SBV also said it would cut the refinancing rate to 13 per cent from 14 per cent and the discount rate by one percentage point to 11 per cent.

Overnight interest rates for electronic and compensation payments on the inter-bank market were to be reduced to 13 per cent from 14 per cent. -- AFP