Despite balance sheet issues, low-interest rates will remain at least for the time being. The central bank’s rate-setting Monetary Board had no other option other than announcing a historically low rate to keep up the money supply. The central bank is keeping the rate at which money is injected at 5.50 per cent and the rate at which excess cash is withdrawn at 4.50 per cent.
Although this liquidity injection will be welcomed by the business sectors it will certainly be a worrying message for those pensioners who live on their saving’s.
Many are questioning the effectiveness of the low-interest rate strategy as there is a slowdown in disbursing credit by banks and other lenders.
The Board stressed the need for the financial system to actively lend to productive sectors in order to boost production.