Commercial Loan interest Rates 2015Industrial loan interest 2015
In the course of 2015, the CBTT increased the country's base lending interest by three 25 base point (bps) hikes and raised it to 4.75% by December of this year. Then followed a relatively brief break in the first three months of 2016. It appears that the public administrations have taken the position that it is necessary to keep pace with the US interest reduction in order to avoid an exodus of funds.
In April 2016, Treasury Secretary Colm Imbert excluded the option of an immediate depreciation of the euro. The CBTT also clearly rationed the dollar offer to the FX markets. These policies were designed to protect the country's FX reserve, which amounted to 9.5 billion US dollar or 11 month imports in March 2016.
The CBTT predicted this number to be 8.5 billion dollars or 10 monthly import volumes by the end of 2016, according to an April 2016 RBC Royal Bank survey. In spite of its choice to keep the repos level flat, the CBTT raised the benchmark MMRR from 2.75% to 3% in the same month, referring to higher returns on 15-year Treasury notes and increasing costs on commercial bank money.
T&T Securities Dealers Association Chairman George Sheppard pointed out that the gradual increase in repurchase agreements that began under the former administration had a positive impact on banks' earnings. "Rebo rates are good for surplus cash in the commercial bank system.
Regardless of what the repos is, if commercial bankers can take out loans with each other, they won't have the need to lend from the CBTT at a higher repos," he OBG said. However, with the commercial banks' base rates compared to the repos rates, the effect was that the bank raised their loan rates but did not raise their deposits rates.
As a result, in a weakening economic environment, banking appears to be doing even better than before and outperforming many of its clients. Finally, margin could be affected by an rise in non-performing debt and, above all, banking will be forced to make more payments to depositers and reduce spread size as surplus cash is taken up by the system.
Considering all these elements, respondents anticipate that the repurchase price will be 5.25% by the end of 2016. CBTT is likely to halt further streamlining of the repos as US interest rates start to increase for afraid that the present downturn will worsen. Therefore, the most likely outcome is one in which there is no more than a modest fiscal streamlining over time.