Inflation rises to 5.1%
Inflation is on the rise in Trinidad and Tobago.
Headline inflation rose 5.1 per cent in August, from 3.8 per cent in July; it was 7.9 per cent one year earlier, according to the latest available data from the Central Statistical Office.
This was mainly due to a rise in food inflation, which increased to 7.7 per cent in August 2013 from a low of 4.8 per cent in the previous month. Core inflation inched slightly upwards but remains stable at a little over 3.0 per cent in August 2013, the Central Bank said yesterday.
“There are encouraging signs that the domestic economy appears to be on a path of recovery, as evidenced by four consecutive quarters of slow but steady year-on-year growth from July 2012 to June 2013,” the Bank said.
In its Monetary Policy announcement yesterday, the Bank said growth had been mainly driven by the non-energy sector and this trend is expected to continue into the second half of 2013 as the planned maintenance of gas and downstream plants, which began in September 2013, is likely to impact the performance of the energy sector.
The bank said there was a slight uptick core inflation for August 2013 but underlying inflationary pressures remain well contained.
Of concern, however, is the eighth successive month of decline in business lending in July 2013 and elevated liquidity levels, both of which reflect continued caution on the part of the private sector.
Large net domestic fiscal injections along with weak credit demand contributed to a rapid build-up of liquidity levels in the financial system over the past few months. Commercial banks’ excess reserves at the Central Bank rose from a daily average of $5.4 billion in July 2013 to a daily average of $6.3 billion in August. Excess reserves increased even further to a record daily average of $8.3 billion over the first three weeks of September. While a $1 billion Central Government treasury bond offered in early August 2013 was undersubscribed, the allotment of almost $560 million helped to reduce some of the excess liquidity.
Against this backdrop, the Central Bank views the present accommodative monetary policy stance as appropriate to support the ongoing recovery, and has decided to maintain the ‘Repo’ rate at 2.75 per cent.
“The Central Bank will continue to nurture financial conditions supportive of the recovery, while keeping economic and monetary conditions under close review in the coming months,” the report said.
The next Monetary Policy Announcement is scheduled for November 29.