Despite an increase in inflation, but amid generally stable global economic conditions, the Monetary Policy Committee of the Central Bank yesterday opted to maintain the repo rate at 3.50 per cent.
In the Monetary Policy Announcement for June 2024, the MPC said, “Domestically, the low level of inflation and buoyancy of credit were supportive of the ongoing economic recovery, although the negative interest rate differential warranted close monitoring given its potential impact on the country’s external balance.”
The release said that based on the latest data from the CSO, food prices were the main driver of the increase of headline inflation to 0.9 per cent in May from 0.5 per cent one month earlier.
The bank said, “Higher food prices were primarily responsible for the upward drift of inflation. Food inflation accelerated to 3.1 per cent in May compared with 1.1 per cent in April 2024 on account of price increases for several locally produced and imported food items.”
The bank also noted dip in energy sector returned based on CSO information, as it noted, “CSO data also showed a year-on-year decline in real GDP of 2.3 per cent during the third quarter of 2023, with contraction in the energy sector (-10.3 per cent) offsetting the positive performance of the non-energy sector (1.3 per cent).”
The MPC stated, “Production indicators monitored by the Central Bank during the fourth quarter of 2023 and into the first three months of 2024, such as local sales of cement and new motor vehicle sales, point to vibrancy in some non-energy sectors. Meanwhile, data from the Ministry of Energy and Energy Industries indicate that output of crude oil and natural gas from the mature fields continued to slip over this period. “
The MPC once again stated the liquidity in the financial sector remained “ample” despite figures dropping slightly compared to last year.
The report stated, “Commercial banks’ excess reserves at the Central Bank averaged $4.2 billion in the first half of June 2024, marginally lower than in May 2024 ($4.3 billion). There was nonetheless some skewness in the liquidity positions of banks, leading some institutions to temporarily borrow on the interbank market. Private sector credit performed favourably, growing by 6.7 per cent (year-on-year) in April 2024 compared with 7.9 per cent in January 2024.”
The MPC said this was led by robust lending for motor vehicles, as there was growth in consumer loans by 10.2 per cent which surpassed the expansion in business lending, which stood at 9.5 per cent.
The report noted that interest rates on three-month treasuries in T&T continued to trend upwards, rising by 27 basis points since February 2024. That resulted in the differential between T&T and US three-month treasuries moving to -4.06 per cent in May 2024 from 4.32 per cent in February.
Central Bank Governor, Dr Alvin Hilaire, chairs the MPC.
