'NEW SYSTEM COMING IN MARCH': Finance Minister Larry Howai during his contribution at yesterday's sitting of the Upper House. Flanking him are Justice Minister Christlyn Moore, left, and Gender Affairs Minister Marlene Coudray. —Photo: ISHMAEL SALANDY

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Inflation dips to 7.2%

...slows for second month in a row

Trinidad and Tobago's inflation rate has slowed for the second consecutive month.

The latest available data from the Central Statistical Office (CSO) released by the Central Bank yesterday showed that headline inflation slowed 7.2 per cent in December 2012, from 8.1 per cent in November.

In its first Repo Rate report for 2013, the Bank noted headline inflation for the whole of 2012 averaged 9.3 per cent, up 5.2 per cent from 2011. Last year, May recorded the highest inflation rate at 12.6 per cent.

Food inflation, which continues to exert a strong influence on the headline inflation rate, slowed to 12.7 per cent, down from 14.9 in November.

This slowdown in the rate of food inflation for December partly reflects the impact of the removal of Value Added Tax (VAT) November 15, 2012, on several food items, the Bank said. In this context, there were slower price increases in December for bread and cereals (0.7 per cent versus 1.4 per cent in November); meat (8.5 per cent compared with 10.3 per cent); fish (8.2 per cent versus 9.0); milk, cheese and eggs (0.3 versus 0.4); oils and fats (2.7 versus 6.1); and sugar and confectionery products (1.8 compared with 2.7). Vegetable prices decelerated to 26.8 per cent from 28.1 in November, while the price of fruits went down, decelerating markedly throughout the year after a high of 62.1 per cent in January 2012 to -2.8 per cent in December.

Core inflation (which excludes food prices) remained at 3.1 per cent. Slower year-on-year increases were recorded for alcohol, tobacco, health, clothing and footwear, and recreation and culture.

Private sector credit continued to rise moderately during the final quarter of 2012. The Bank added there was a major lending categories in November 2012. Real estate mortgage lending continued to grow at a robust pace, increasing by 11.3 per cent in the 12 months to November 2012.

Commercial banks' reserve balances at the Central Bank rose in December 2012 to $4 billion from $3.3 billion in November 2012. In early January, excess liquid balances hovered at just under $3 billion as the payment of quarterly taxes helped to drain some excess funds from the financial system.

"Although there were some encouraging signs of a recovery in domestic economic activity during the third quarter of 2012, credit demand is still subdued. With core inflation relatively well-contained, the Bank has decided to maintain its accommodative monetary policy stance to sustain the nascent recovery in economic activity. Consequently, the Bank has decided to hold the Repo rate at 2.74 per cent," the Bank said.

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