Central Bank of Barbados flexes its monetary levers

Acting Governor of the Central Bank of Barbados, Cleviston Haynes , announced that “changes” will be coming to the financial sector as the Government and the Central Bank attempts to “tighten” monetary policy.

It is expected that effective June, 2017, commercial banks operating in Barbados will be required to hold a higher percentage of Government bonds and other promissory certificates than they currently do.

The Reserve Requirement Ratio will also be increased to 15%.

With excess liquidity up 60% (10.6% to 17%) compared to last year, a string of credit rating downgrades, reduced opportunities for good lending, pressured foreign exchange reserves, an unsustainable fiscal trajectory, negligible fiscal multipliers and the limited maneuverability a fixed exchange rate regime affords, the cards seem stacked against the authorities.

It will be interesting to see if this new policy position will bring about the desired results.

Link: https://www.barbadostoday.bb/2017/05/09/central-bank-tightens-monetary-policy/

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