On Monday, The[ Central Bank of The Bahamas](http://www.centralbankbahamas.com) announced its decision to reduce the Discount Rate by 75 basis points to 4.50 percent, effective immediately. The Regulator noted that it would expect financial institutions to follow suit with a corresponding reduction in the Prime Rate, from 5.50 percent to 4.75 percent, and similar adjustments in their lending rate schedules. This is predicted to save debt holders (individual borrowers as well as businesses) substantially in interest payments collectively over the next year. Subsequently, the Clearing Banks Association (CBA) confirmed it would lower its benchmark Bahamian Prime lending rate by 0.75 percentage points, with interest rates on variable rate loans such as mortgages, overdrafts and commercial loans set to be “re-priced” as a result. This took effect as of today.

A release from the Central Bank indicated that it had considered a number of factors in its decision to adjust monetary policy, including the signs of a more positive outlook for global growth and the implications for domestic economic activity. “Based on an improving performance of tourism and foreign direct investment activity, the Bahamian economy is poised to grow by nearly 1.5% in 2011 and in excess of 2.0% in 2012—with broadening medium term benefits for employment and opportunities for the productive sectors.”

The Bank also acknowledged the improvement in the external reserves position over the past two years, to historic levels, and the opportunities for this position to be sustained in the short to medium term by net inflows from the foreign exchange earning sectors.

Governor Wendy Craigg points out that the Central Bank remains committed to responding appropriately to ongoing economic and monetary developments, in its goals to achieve monetary stability and contribute to sustainable economic growth.