Bank of Cape Verde reduces basic interest rate to 3.5 pct

16 February 2015

The Bank of Cape Verde reduced its benchmark interest rate by 25 basis points, from 3.75 percent to 3.5 percent and reserve requirements by three percentage points, from 18 percent to 15 percent, the governor the central bank said Friday.

João Serra said that these two monetary easing measures were intended to counteract sluggish economic activity and stimulate growth, as “in order for there to be more robust internal growth it is necessary to adopt active policy measures and make effective use of available resources.”

The governor also said that based on the positive evolution of inflation and external accounts, since 2013 the central bank had implemented a monetary easing policy, and used, for example, the standing facilities of deposits and loans, as well as issuing its own bonds to influence the decisions of commercial banks and to manage liquidity in the banking system.

However, the transmission of monetary policy measures to the real economy has not been desirable due to structural constraints and the unfavourable economic environment.

Serra concluded by saying “it is now up to commercial banks to follow the same route and lower the interest rates that apply to their customers.”

The decisions announced by the central bank of Cape Verde came into force today. (macauhub/CV)