WILLEMSTAD - During 2018, the Bank kept the reserve requirement, one of its monetary policy instruments, unchanged at 18.00%. Nevertheless, the number of required reserves rose by NAf.27.6 million up to November 2018, as a result of the higher base amount upon which it is calculated.

Furthermore, the Bank increased its official interest rate, the pledging rate, by 0.50 percentage point to 2.00% on March 27, 2018. After being kept at the historically low level of 1.00% since December 2008, the Bank adjusted the pledging rate earlier on March 20, 2017, by 0.50 percentage point.

These increases followed after the upward adjustments of the federal funds rate, its impact on the international interest rates and, hence, the domestic money market rates.

During 2018, the Bank continued to gradually reduce the number of outstanding certificates of deposit (CDs)7. Consequently, the number of outstanding CDs dropped from NAf.160.8 million at the end of December 2017 to NAf.8.0 million at the end of November 2018.

The current account balances of the 6 The last adjustment of the reserve requirement percentage occurred in June 2014. The policy of gradually reducing the outstanding number of CDs was introduced in August 2017 after an evaluation concluded that the auctioning of CDs is not an effective instrument during a prolonged period of excess liquidity. commercial banks at the Bank were NAf.14.3 million higher at the end of November 2018 compared to December 2017.

Up to the third quarter of 2018, broad money contracted by 0.3% due to a decrease in net domestic assets while net foreign assets increased.

Credit extension to the private sector developed rather sluggish in 2018. On an annual basis, private credit extension in the monetary union dropped by 1.2% in September 2018. Outstanding loans in both Curaçao and Sint Maarten declined by 0.9% and 2.0%, respectively. The contraction in Curaçao was the result of declines in mortgages (-2.7%), business loans (-0.2%), and in the “other loans” category (-13.3%) moderated by an increase in consumer loans (2.6%).

Monetary and liquidity conditions:

The current account balances of the commercial banks at the central bank are still high.

Low international interest rates; Fed funds rate between 2.00 - 2.25%.

On November 30, 2018, the 1M USD Libor rate stood at 2.35% while the 3M USD Libor was 2.74%.

Auctioning of CDs: the amount outstanding was NAf.5.4 million on December 3, 2018. The latest CD interest rate offered on the auction of December 3, 2018 was 0.18% for 4 weeks.

For the November – December 2018 period, the reserve requirement percentage remained unchanged at 18.00% and the outstanding amount was NAf. 1,314.4 million.

The pledging rate stands at 2.00% since March 27, 2018.