Both Sides of The Coin: The Story of The Central Bank of Barbados 1972-2017

49 per cent and nine per cent, respectively. At the same time, the Bank agreed to allow holdings of bonds issued by statutory corporations to count as debenture holdings. The Hire-Purchase, Credit-Sale and Hire-Control Act came into force on October 17 giving the Bank power, subject to ministerial approval, to control all credit of this type by statutory orders. A new structure of interest rates payable on time deposits was introduced from February 1, 1975. Under this method of calculation, deposits of less than $1,000 earned 7 per cent. Deposits over $1,000 attracted rates according to their maturities as follows: Up to six months, 8 per cent, Between six months and one year, 9 per cent, Between one year and two years, 9.5 per cent, and Over two years, 10 per cent. These changes were intended to encourage depositors to keep their funds in the banks longer than previously, thereby postponing consumption and easing the pressure on the balance of payments. As the year progressed and the economy faltered, easier monetary policy was implemented. There was a general decline in deposit rates and the Bank reduced the “bank rate” on three occasions, by one percentage point each time, pushing it down from 10.5 per cent to 7.5 per cent by year-end. FIXING THE EXCHANGE RATE The Sterling Guarantee Agreement When the Bank was established, the Barbados currency had been fixed to the British pound at a central rate of Bds$4.80 to one pound since 1938. Barbados, like other former UK territories in the Caribbean, was a signatory to the Sterling Guarantee Agreement with the UK Government. Chapter 2: The Early Years: 1972 - 1975