However, headline inflation rose to 5.1% year-on-year

Durrant Pate/Contributor

The Central Bank of Trinidad and Tobago (CBTT) has announced that it has decided to keep its repo rate unchanged at 3.50 per cent, despite higher inflation.

This move by the Central Bank is signalling that the monetary authority is not prepared to increase the cost of lending at this time.

The repo rate is the overnight rate the Central Bank charges commercial banks and it is used to signal to the banks the direction of local interest rates.

In its monetary policy announcement, the Central Bank notes that higher international interest rates were already being reflected in interest differentials such as the US three-month treasuries which were about 73 basis points higher than equivalent domestic instruments in May 2022. 

The Caribbean twin-island republic’s Central Bank acknowledged that international inflation had caused higher prices in the country but data indicated that, while a recovery is under way, it is not firmly established.

The CBTT reported that financial system liquidity remains ample with commercial banks’ excess reserves at the Central Bank averaging TT$5.3 billion in early June 2022.  

Business lending continued to accelerate, expanding by 7.4 per cent in March 2022, and driven by increased loans to the construction (17.5%), manufacturing (12.3%) and ‘other services’ (10.9%) sectors.

Credit card loan growth turned positive (0.8%) in March after falling off since the onset of the pandemic.

Inflation rising

In the meantime, headline inflation rose to 5.1 per cent (year-on-year) in April 2022 compared with 4.1 per cent a month earlier. Food inflation picked up to 8.7 per cent from 7.9 per cent, reflecting higher prices for rice, margarine, edible oils and meat.

Core inflation (which excludes food items) rose to 4.1 per cent from 3.2 per cent in the previous month, partly due to the adjustment to domestic fuel prices. Prices of building materials have also shown relatively significant increases, according to available data, especially on imported components.

International inflation had also spilled over to Trinidad and Tobago and was expected to continue its upward path. At the same time, the impulses to domestic prices were currently externally generated.