NASSAU, BAHAMAS — The United States Federal Reserve’s decision last week to raise interest rates to combat a surge in inflation has the potential to disrupt this nation’s economic rebound, a well-known financial executive warned yesterday, noting that the knock-on effect of reduced US consumer spending could impact segments of this nation’s number one industry.
The US Federal Reserve last week raised interest rates by three-quarters of a percentage point, the highest since 1994 as that country continues to grapple with high inflation. Increasing interest rates is viewed as a tool to increase borrowing costs which leads to reduced spending which in turn causes a decrease in demand and ultimately causes the price of goods to drop.
Gowon Bowe, Fidelity Bank (Bahamas) chief executive told Eyewitness News the move has a “tremendous impact”, adding market strategy was critical at this time to understand the target market.
“Traditionally The Bahamas has been on the higher end of the tourism market with persons who have large disposable income,” he said.
“The impact of the interest rate increase and potential impact of a recession in the US certainly carries the risk of disrupting some of our rebound which is of great concern.
Bowe continued: “Balancing aspect which is a little more comforting is that we don’t target person on the margins whose disposal income may go from affording a vacation to not affording vacation. We typically target those who may say they can afford a two-week vacation and may want to scale back a bit to handle some priorities but still have disposable income.
“With the US being our primary provider of tourists to our destination the increase of interest rates of consumer borrowing more expensive is going to have an impact of the disposable income, the length of stays and willingness to spend on airfare increase and the like. It is going to have an impact though probably to an even greater extent those jurisdictions targeting the bargain basement shopper.”
According to Bowe, the stop-over segment may not be as significantly impacted however the cruise segment which typically attracts vacationers looking for bargains and deals will likely be more greatly impacted.
“We have to be prepared for it and as best as we can prepare to sustain headwinds that come along with it,” he added.
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