A regional think tank has said that interest rates in the Caribbean are not falling as fast as expected. The Caribbean Centre for Money and Finance of the University of the West Indies, says the current global economic downturn would normally encourage lower interest rates. In its March newsletter the Centre said there were expectations for a greater drop in loan and savings rates, given developments in the US and what it called the problem of chronic excess liquidity, or cash deposits, in some countries of the region.
The greatest movement in the cost of borrowing and the return on savings was being felt in Barbados and Trinidad and Tobago.
Rates in the Eastern Caribbean and Guyana have remained flat, while they have fluctuated in the Bahamas.
Trend
The Caribbean Centre for Money and Finance noted that falling rates should normally lead to an increase in the demand for loans and a disincentive to save, however, the opposite appears to be happening in the region.
For example, in Barbados and Trinidad and Tobago the rate of growth in loans is decreasing while that for deposits is rising.
Some possible reasons, the Centre noted, could be that the economic downturn had affected business and consumer confidence, or that financial institutions had become more cagey on lending.
According to the institution, the well-documented problems of Trinidad-based conglomerate CL Financial and the Allen Stanford Bank may also have encouraged investors to be wary of higher yielding investment options.
