SOURCE: CMC – The Central Bank of Trinidad and Tobago (CBTT) is blaming a surge in international commodity prices for a “discernible increase in food prices” here.
It said that adverse weather had also contributed to the increase with the figures released by the Central Statistical Office (CSO), showing that food inflation (year-on-year) rose from 3.2 per cent in January to 4.9 per cent in July 2021.
The largest increases were recorded for vegetables, fruits, milk, cheese and eggs. Core inflation, which excludes food items, remained relatively contained at 1.6 per cent in July 2021, with headline inflation measuring 2.2 per cent, the CBTT said, warning that these could rise further in coming months in light of recently announced increases in transportation fares.
Regarding the performance of the domestic economy, the CBTT said that during the second quarter, shortfalls in natural gas availability hampered production of liquefied natural gas and ammonia, while methanol output surpassed levels of the corresponding period of the previous year when several facilities had been shut down.
“Nationwide restrictions on movement and on permissible activities in order to curb the spread of the virus severely impacted production and distribution of many non-energy goods and services in recent months.
“Despite this, improvements occurred in the electricity, water, finance and real estate subsectors. The relaxation of restrictions in the context of higher levels of vaccinations is expected to lead to a resumption in non-energy production – in particular construction, distribution and food services – in the final quarter,” the bank said.
It noted that monetary and financial indicators point to ample liquidity and signs of an incipient recovery in credit demand in some sectors.
Commercial banks’ unremunerated excess reserves at the Central Bank amounted to TT$8.3 billion (One TT dollar=US$0.16 cents) in mid-September 2021, up from TT$7.5 billion at the end of March.
The annual growth rate in credit to the private sector has been positive since April 2021, with some substitution away from consumer and business credit towards real estate mortgage loans.
On the business side, there has been a noticeable rise in loans for construction, alongside a decline in financing for services.
“With respect to interest rates, the TT/US differential on three month treasuries stood at 28 basis points at the end of August, compared to 30 basis points at the end of May. The differential on 10 year instruments increased from 321 basis points to 351 basis points between May and August.
Meanwhile, Trinidad and Tobago’s international reserves rose to seven billion dollars at September 17, reflecting over eight months of prospective imports, partly due to the inclusion of US$644 million from the International Monetary Fund’s (IMF) general allocation of Special Drawing Rights (SDRs) in late August.
“In its deliberations, the Monetary Policy Committee (MPC) reviewed domestic developments to date, the supply-side factors that were leading to an increase in prices and the prospects for a gradual recovery as business activity resumes.
“The MPC also took note of the evolution of global financial conditions, notably the prospects for monetary tightening in advanced economies,” the CBTT said, adding that taking all factors into account, the Committee decided to maintain the repo rate at 3.50 per cent.