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Bahamas Central Bank ‘Finally’ Slashes Discount Rate

The Central Bank of The Bahamas is knocking 75 basis points off the discount rate, reducing it to 4.5 percent.

For Bahamians and local businesses it could translate into a lighter burden for servicing existing loans, and make borrowing for future projects less costly.  The business community welcomes the rate reduction, although many feel it is a bit late.

“I think its long overdue in the sense that throughout the world and especially the western hemisphere the monetary policy response to the great recession was to lower interest rates in terms of providing additional stimulus to the economy,” said Minister of Finance James Smith to a local paper.

“In The Bahamas it seems to have taken a very long time, but it is a welcomed position to take.”

The announcement by the Central Bank is expected to see financial institutions drop the prime rate from 5.5 percent to 4.75 percent, adjusting their lending schedules accordingly.  While the discount rate represents the rate at which banks would borrow from the Central Bank and is under its direct control, the prime rate represents the lowest rate at which money could be borrowed from licensed banks and financial institutions.  Banks usually have about three months before they must implement any changes.

Posted in Business

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