The Central Bank of Barbados announces a reduction in interest rates
The Central Bank of Barbados today announced that effective April 1, 2008 local interest rates will be reduced.
The rates will decline by 25 basis points from 4.75 % to 4.50 %.
The Bank explained that the minimum deposit rate is the benchmark for other rates of interest in Barbados and the decision to reduce it was influenced by a number of developments. Many forecasters are projecting a marked slowdown in world economic growth during 2008 and the record levels reached by petroleum prices in recent trading can only reinforce this projection.
The Bank further stated that any weakening in the economies of major trading partners will impact negatively on economic activity in Barbados. It is hoped that a cut in deposit rates will lead to a general reduction in loan rates and so help to reduce the operational costs of business enterprises, particularly those which earn foreign exchange.
According to the Central Bank, the softer monetary stance adopted by the United States (US) Federal Reserve since late 2007 has depressed interest rates in the US to levels which are somewhat below those in Barbados. Basic deposit rates in Caricom countries are also generally lower than those in Barbados.
This reduction will, therefore, bring rates in Barbados closer to those in the region, in line with the trend towards greater macroeconomic convergence in Caricom. At the same time it allows domestic deposit rates to maintain a positive differential with those abroad, thereby providing some safeguard against the outward movement of capital.