Central Bank report: inflation slowed to 5.7%

Central Bank of TT. File photo/Jeff K Mayers
Central Bank of TT. File photo/Jeff K Mayers

Central Bank in its latest Monetary Policy Report June 2023 noted a slow and steady domestic economic recovery for the first quarter of this year.

According to the index of retail prices, headline inflation slowed to 5.7 per cent in May compared to 6.0 per cent the month prior and 8.7 per cent in December 2022.

The declining international food prices, in tandem with easing local produce prices, resulted in a decline in food inflation to 9.7 per cent in May, from 11.2 per cent in April and 17.3 per cent in December 2022.

The report said core inflation, which excludes food prices, remained unchanged at 4.8 per cent in May from the previous month but lower than the 6.7 per cent recorded in December 2022. The outlook noted that adverse weather could lead to some spikes in local food crop prices.

On the energy side, there were increases in liquid natural gas and methanol production compared to the first quarter of 2022, alongside reduced output of crude oil, natural gas, natural gas liquids, ammonia and urea.

In the non-energy sectors, strengthened business activity and consumer demand were reflected in expansions in the transportation and storage, wholesale and retail trade, electricity, water and construction sectors. Activity in the finance, insurance, manufacturing and agriculture sectors demonstrated somewhat less buoyancy during the period.

The private sector credit was relatively steady over the first four months of 2023, with growth of 6.5 per cent on a year-on-year basis in April, bolstered by consumer loan demand and real estate mortgage lending.

Credit to businesses sustained a healthy clip of 6.4 per cent expansion, albeit slower than the 9.8 per cent growth recorded in December 2022, the report noted.

Liquidity remained ample, as commercial banks’ excess reserves at the bank increased from a daily average of TT$6.6 billion in March to TT$7.8 billion by the middle of June 2023.

Between February and May, the short term three-month differential between TT and US three-month treasuries moved to -476 basis points from -429 basis points in the context of continued interest rate increases by the US Fed.

The monetary policy committee (MPC) carefully examined international economic developments, in particular the slowdown in global growth, geopolitical tensions, decline in inflationary pressures and the monetary stances of major and other central banks. The committee also took note of the widening negative TT-US interest differential, progressive domestic decline in inflation and a gradual economic recovery.

Taking all factors into account, the MPC agreed to hold the repo rate at 3.50 per cent.

The Central Bank said they will continue to monitor and analyse international and domestic developments and will take further actions as necessary.

The next monetary policy announcement is scheduled for September.


"Central Bank report: inflation slowed to 5.7%"

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