ECCB 2014-2015 Annual Report and Statement of Accounts

EASTERN CARIBBEAN CENTRAL BANK

statutory and operational limits of 60.0 per cent and 80.0 per cent respectively. The fixed exchange rate contributed to low and stable inflation, providing an enabling environment for sustainable growth and development. Consumer prices rose by 1.5 per cent during 2014, compared to a decline of 0.2 per cent in the previous year. Real Gross Domestic Product (GDP) is provisionally estimated to have risen by 1.3 per cent, up from 1.1 per cent in 2013. The growth outturn for 2014 reflected positive contributions from hotels and restaurants, transport and storage, and the agriculture, livestock and forestry sectors (Chart I).

Chart II

Chart I

The divergence between money and credit aggregates remained a central policy concern in monetary policy assessments. The focal point of discussion was the efficacy of utilising the Bank’s traditional monetary policy tools, such as the minimum savings rate, the reserve requirement and the discount rate to leverage available financial resources to fund economic growth and development. In that regard, the Monetary Council, at its 81 st Meeting on 24 February 2015, reduced the Minimum Savings Rate from 3.0 to 2.0 per cent. It is anticipated that the reduction, supported by moral suasion, will encourage commercial banks to increase the availability of credit to ECCU firms and households, thus relaxing the credit constraint. The Bank’s discount rate was maintained at 6.5 per cent. The forecasted improvement in economic activity in the countries of the main trading partners of the ECCU in 2015 and 2016 is expected to result in an increase in trade and financial flows, easing monetary and credit conditions and supporting an expansion in domestic activity.

The stock of broad money expanded by 5.9 per cent during 2014, compared with an increase of 4.7 per cent during the previous year. In contrast, domestic credit declined by 6.5 per cent, reflecting in part a tightening of lending terms and conditions by commercial banks, loan write-offs, elevated credit and market risks, and the slow pace of the economic recovery (Chart II).

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ECCB ANNUAL REPORT 2014/2015