The Central Bank of Barbados announces Modification to its Monetary Policy

The Central Bank of Barbados wishes to advise of a modification to its monetary policy.

Effective April 1, 2005, the minimum rate of interest payable on deposits will be increased from 2.25% to 2.75% per annum.

The increase in the minimum deposit rate has been influenced by two considerations.  The first is the significant increase in net domestic assets in the financial system during 2004 which was heavily influenced by increased credit and was reflected, in the main, by increased imports of consumer goods and services.  The Bank is also mindful of the fact that interest rates abroad, particularly in the US, have risen by 1½ percentage points since the start of 2004.  When foreign rates of deposit are noticeably higher than domestic rates, there is an incentive for financial resources to be invested abroad with adverse effects on the balance of payments.

The Central Bank has altered its monetary policy stance in order to encourage more savings at the expense of consumption activities and simultaneously discourage outflows of capital.

The modification in monetary policy is being published in the Official Gazette of March 17, 2005.