As of today, October 1, FirstCaribbean International Bank Jamaica Limited (FCIBJ) has cut 150 basis points off its prime lending rates, and so its new prime lending rate will adjust from 21.75% to 20.25%.
It’s the second of seven commercial banks to cut its lending rates, following Scotia-bank’s one-point adjustment of its base rate in August to 20.5%. Both have taken their cue from the Bank of Jamaica which has already cut signal rates five times this year (taking a cumulative 4.5% off benchmark rates since July).
FirstCaribbean said that the cut in its prime rate follows previous adjustments in June on interest rates applied to auto loans and general purpose loans “in line with the industry“.
Several other commercial banks are reportedly considering a cut in their lending rates as well. National Commercial Bank (NCB) says that its current base lending rate of 21.75% is negotiable, while First Global Bank says that its 20.75% rate is under review.
It is hoped that lower domestic interest rates will make borrowing relatively more attractive than savings in domestic instruments (i.e. deposit instruments etc.). In this context, households will increase expenditure, particularly on durables, while businesses would have a greater incentive to expand or retool, as financing costs will be lower. The increased expenditure would theoretically (and hopefully) provide some impetus to economic activity.
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