ECCB 2017-2018 Annual Report and Statement of Accounts

ECCB ANNUAL REPORT 2017/2018

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Reserve Management The year was characterised by rising bond yields in the UnitedStatesamidstan improvingeconomyand increases in the Federal Funds target interest rate. The Federal Reserve (Fed) raised the policy rate three times during the review period. Consequently, US Treasury yields rose significantly. Despite the increase in interest rates, the ECCB continued to achieve its reserve management objectives of preservationof capital,meeting liquidityneeds and outperforming the Bank’s foreign reserve benchmarks. Following The World Bank’s acceptance of the ECCB’s request to be a member of the Reserve Advisory and Management Programme (RAMP) in the prior financial year, the Bank engaged the International Bank for Reconstruction and Development (IBRD) as a new money manager to manage a portion of the Bank’s foreign reserve portfolio.

2.3 per cent in 2016. The acceleration in the growth of M2 was on account of increases in private sector savings ($450.5m) and demand deposits ($249.9m) offset by declines in private sector time deposits ($266.8m). The acceleration in the money supply, within a fixed exchange rate arrangement, was reflective of increased economic activity in the ECCB member countries. The reduction in time deposits, indicated a shift towards demand and savings deposits due to lower interest rates on time deposit. Conversely, domestic credit contracted by $338.7m or 3.4 per cent in 2017, reflecting continued risk aversion in the commercial banking sector and the effects of hurricanes Irma and Maria. That contraction was primarily attributed to lower credit extension to private sector businesses. Additionally, lending terms and conditions along with credit demand tightened over the period.

Chart 2 - ECCU selected economic Indicators, per cent change