Central Bank holds repo rate steady, warns of external concerns

The energy sector gave the TT economy a boost in the last quarter of 2018, albeit slower than the first half of the year, the Central Bank said in its Monetary Policy Report, but external factors, including Venezuela, Brexit uncertainty and US-China trade complications are causes for concern.

The report, released on Friday, said natural gas output expects a boost in 2019 from BPTT’s Angelin and other investments, with positive spin-offs on downstream activities that have been adversely affected by the ongoing curtailment.

At the same time, petroleum (crude oil) production is trending down because of maturing fields, compounded in the short run by the reorganisation of Petrotrin refinery operations.

Outside of energy, though, the Central Statistical Office’s Index of Domestic Production showed a 26.7 per cent increase (year-on-year) in non-energy production in the final quarter of 2018, primarily in the food manufacturing, beverages and tobacco industries. Other available indicators monitored by the Central Bank, such as retail sales, new car registrations and production of mined aggregates, suggest general steadiness of non-energy activity at the end of 2018 into early 2019.

The impact from the increase in public-sector works is likely to be felt in the coming quarters, the bank said. Inflation also remains low, and headline inflation was 1.2 per cent in February, the result of monetary policy, demand conditions and low imported inflation.

Interestingly, the bank said, historically volatile food prices have been remarkably slow-moving in recent months, with slight declines recorded for meat, fruits and vegetables. This could change in the wake of a forecast very harsh dry season.

The Monetary Policy Committee agreed that the more complicated external environment suggested interest rates in the US and other advanced economies would be shallower than anticipated in 2018. Domestic and International factors taken into consideration, the committee decided to hold the repo rate steady at five per cent. The next Monetary Policy announcement is scheduled for June 28.