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Central Bank: Inflation rate drops

Trinidad and Tobago’s inflation rate decreased to 5.5 per cent in April, the Central Bank said in a release yesterday. 

The latest data on retail prices released by the Central Statistical Office, the Bank said, have indicated a headline inflation decrease over March’s 6.9 per cent year on year.  

However, on a monthly basis, headline inflation rose by 1.5 per cent in April, following an increase of 0.2 per cent in March 2013,” the Bank said. 

For the first time since October 2011, food price inflation slowed to single digit territory, reaching 9.4 per cent in April, compared to 26.2 per cent for the same period last year, and 15 per cent the year before. 

“An increase in domestic supply of some food items may have helped to dampen the impact on prices as weather conditions were generally favourable,” the Bank said. 

Core inflation, which excludes food prices, rose marginally to 2.4 per cent in April, up from 2.2 per cent in March. 

There were sharper price increases for alcoholic beverages and tobacco (5.0 per cent from 4.1 per cent in March) and clothing and footwear (2.3 per cent in April from 1.7 per cent in March).

Private sector credit growth remained subdued. 

Growth in consumer lending continued at a reasonable clip, but business lending contracted for the fourth consecutive month. 

Although there was some slowdown in real estate mortgage lending, the pace nevertheless remained robust in March 2013. 

The financial system continues to be highly liquid, with commercial banks’ excess reserves at the Central Bank averaging $6.5 billion on a daily basis from May 1 to 21 compared with $5.3 billion in April 2013. 

Central Bank sales of foreign currency to authorised dealers indirectly removed $637 million from the system. 

To encourage credit demand, banks lowered their lending rates in early 2013. Commercial banks’ weighted average lending rate fell to 8.59 per cent in March 2013 from 8.75 per cent in December 2012. 

The recent slowdown in headline inflation and the continued stability in core inflation suggest that general price pressures are contained although food price pressures may increase in coming months with the advent of the rainy season. 

Economic growth is still not as strong as expected, underlined by the further contraction of business credit.  

“In such an environment, the Central Bank views the present accommodative monetary policy stance as appropriate and has decided to maintain the Repo rate at 2.75 per cent. The bank will continue to keep economic and monetary conditions under close review in the coming months,” the Bank said.

The next Repo rate announcement is scheduled for June 28. 

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