By CentralBankNews.info
Trinidad and Tobago’s left its benchmark repo rate at 4.75 percent “against the backdrop of muted domestic economic activity, low inflation and an uncertain global economic outlook.”
The Central Bank of Trinidad and Tobago (CBTT) has held its rate steady since January 2015 when it wrapped up a tightening campaign after eight consecutive rate hikes since September 2014 as inflation was now considered to be contained.
Since the CBTT’s last monetary decision in late May, liquidity in the financial system has declined, private sector credit growth has slowed, and energy sector production has declined on an annual basis with the output of natural gas and crude petroleum down by 11.6 percent and 9.5 percent, respectively, in the January-May period.
Last month the International Monetary Fund (IMF) said that Trinidad and Tobago’s economy was estimated to have shrunk by 2.1 percent in 2015 and is forecast to contract by another 2.7 percent this year as it continues to feel the effects of lower energy prices and domestic supply side constraints, which are widening the government’s deficit and pushing the current account into deficit.
For 2018 the IMF, which supports the central bank’s current pause in monetary tightening due to the challenges facing the economy, forecast a rebound in the economy, with growth at 2.3 percent.
Trinidad’ and Tobago’s headline inflation rate eased marginally to 3.4 percent in June from 3.5 percent while core inflation, which excludes food prices, rose to 2.2 percent from 2.1 percent.
The IMF forecasts 2016 inflation of 4.6 percent, up from 1.5 percent last year, and 4.7 percent in 2017.
The Central Bank of Trinidad and Tobago published the following statement:
“According to the Central Statistical Office’s Index of Retail Prices, headline inflation measured 3.4 per cent on a year-on-year basis in June 2016 – the same rate recorded in the previous month. Core inflation, which excludes food prices, rose slightly to 2.2 per cent in June from 2.1 per cent in May. Meanwhile, food inflation slowed to 9.4 per cent in June 2016 from 9.6 per cent in May. There were slower price increases in the meat and vegetable sub-indices, while the milk, cheese and eggs sub-index declined. Other gauges of price movements, such as the Building Materials and Producer Price Indices showed negligible changes, reflecting overall subdued aggregate demand.
Since the last Monetary Policy Announcement at the end of May, financial system liquidity has declined. Over the period July 1 – 25, 2016 commercial banks’ excess reserves fell to a daily average of $3.9 billion compared with $6.4 billion in May and $5.6 billion in June. Banks’ excess reserves were elevated in May and June 2016, as investors held liquid funds in anticipation of Government domestic borrowing. Thus far in July 2016, Government operations resulted in a net domestic fiscal withdrawal of $790.7 million, while the Central Bank’s net open market operations removed $32.3 million and sales of foreign exchange the equivalent of a further $1.3 billion.
Against the backdrop of muted domestic economic activity, low inflation and an uncertain global economic outlook, the Central Bank’s Monetary Policy Committee decided to maintain the “Repo” rate at 4.75 per cent at its July 2016 meeting. The Bank will continue to carefully analyse domestic and international economic developments in its deliberations and decisions.
The next Monetary Policy Announcement is scheduled for September 30, 2016.”
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