In a recent review of Morning, Paramin (Farrar, Straus and Giroux, 2016), Walcott’s final published work, I reflected on how difficult it can be to escape Sir Derek’s titanic shadow.
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Is the era of cheap money coming to an end?
In February 2009—as the global financial crisis began to impact T&T and around the time of the collapse of the CL Financial empire—the Central Bank’s repo rate stood at 8.75 per cent.
The repo rate—the Central Bank’s key monetary tool and the amount of money the institution charges for providing overnight credit to banks that are unable to meet their liquidity requirements—was reduced to 8.5 per cent in March 2009 “in order to provide the signal for the lowering of bank lending rates, especially to businesses.”
A little over five years later, the repo rate is at 2.75 per cent where it has stayed since it was reduced by 25 basis points in September 2012.
In February 2009, the prime lending rate offered by commercial banks to their best customers was 13 per cent. Today, the quoted prime lending rate is 7.5 per cent, but for some time now the high levels of liquidity have allowed some customers to negotiate rates below prime.
As recently as December 2008, T&T’s 90-day Treasury Bill rate was an amazing 7.05 per cent and when the rate declined to 4.37 per cent in February 2009, it’s interesting that the Central Bank then spoke about the “sharp narrowing in the differential between US and TT short-term interest rates. This differential fell to 404 basis points (4.04 per cent) in February 2009 from 700 basis points (seven per cent) in December 2008.”