Barbados Central Bank Cutting Interest Rates from October 2008
Amidst turmoil in the International financial markets, the Barbados Central Bank is cutting the minimum interest rate on local deposits from October 20th, 2008.
The Central Bank said its move is to give the Barbados economy a boost, in light of the financial pain afflicting the world markets and the high liquidity in the local commercial banks.
The minimum interest rate payable on deposits will come down from 4.5 per cent to four per cent per annum.
A statement from the Central Bank said: “economic activity (in Barbados) has slowed and the turmoil in world financial markets is expected to impact negatively on tourism and the international business sector in particular, in the short to medium term.
“This environment will increase the risk of credit default if cash flows are not strong. Moreover the banking system is still very liquid and the favourable spread with respect to the US Fed funds rate remains a deterrent to capital outflows.”
A Barbados Bankers Association (BBA) official immediately described the move as “timely.”
BBA Executive, Robert Le Hunte said that Barbadians could expect to see a fall in all lending rates from November 2008, though each bank would determine the extent of the reductions.
Le Hunte said the rate reductions will help boost cash flows and allow businesses to “ride through this expected turbulent time”.
“It is foolhardy to believe that all that is happening internationally will not have some impact on us in Barbados.”
He added: “My own prognosis is that tourism seasons coming forward will not be as buoyant as in the past and any slowdown in tourism will also have a resulting slowdown in the other areas of the economy.”
One Barbados-based finance house has already announced projected losses of approx US$5.7 million as a result of the financial crisis in the United States.
Sagicor Financial Corporation and the Pan Caribbean Financial Services Group told the Jamaica Stock Exchange that its exposure to firms “known to be in financial distress” was US$9.4 million.
“The company’s estimate of projected losses and impairment of capital is US$5.7 million”, the business said in a statement. It noted however that this is less than a quarter of one per cent of its overall financial investment.
With the U.S economy in turmoil, President George Bush last Friday hastily signed into law a wide-ranging $700 billion bill to bail out the highly distressed financial sector.
Bush said the legislation will provide “a variety of new tools to the government, such as allowing us to purchase some of the troubled assets and creating a new government insurance programme that will guarantee the value of others.”
October 6th, 2008