The Central Bank has decided to maintain the repo rate at 3.50 per cent, the level the monetary policy authority has kept the key policy rate since March 2020.
In a statement issued yesterday the Central Bank explained its decision was based on several factors.
It noted that indicators monitored by the Central Bank showed signs of a slow and steady recovery of the domestic economy in the first quarter of 2023.
On the energy side, the Bank said there were increases in liquid natural gas (LNG) and methanol production compared to the first quarter of 2022, alongside reduced output of crude oil, natural gas, natural gas liquids, ammonia and urea.
On T&T’s non-energy economy, strengthening business activity and consumer demand were reflected in expansion in the transportation and storage, wholesale and retail trade, electricity, water and construction sectors.
Also, according to the Bank, activity in the finance, insurance, manufacturing and agriculture sectors demonstrated somewhat less buoyancy during the period.
Regarding domestic inflation, the Central Bank said this trended downward over the first five months of 2023, noting that according to the Central Statistical Office’s Index of Retail Prices, headline inflation slowed to 5.7 per cent in May 2023, compared with 6.0 per cent one month prior and 8.7 per cent in December 2022.
Further, the bank cited 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 2023, from 11.2 per cent in April 2023 and 17.3 per cent in December 2022.
The bank also took into consideration core inflation, which excludes food prices, which remained unchanged at 4.8 per cent in May 2023 from the previous month but lower than the 6.7 per cent recorded in December 2022.
“The outlook is for continued moderation in headline inflation, although adverse weather could lead to some spikes in local food crop prices,” the Central Bank added.
The Monetary Policy Committee (MPC) also cited that 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 2023, bolstered by consumer loan demand and real estate mortgage lending.
Credit to businesses also sustained a healthy clip of 6.4 per cent expansion in the 12 months to April 2023, albeit slower than the 9.8 per cent growth recorded in December 2022.
Further, the bank said liquidity remained ample, buttressing the supply of credit to the economy, noting that commercial banks’ excess reserves at the Central Bank increased from a daily average of TT$6.6 billion in March 2023 to TT$7.8 billion by the middle of June 2023.
“Between February and May 2023, the shortterm three-month differential between T&T and United States 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 Central Bank further explained.
The committee 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 said it also took note of the widening of the negative TT/US interest differential, alongside evidence on the domestic side of a progressive decline in inflation and a gradual economic recovery, facilitated by credit that was expanding just above the pace of headline inflation.
“Taking all factors into account, the MPC agreed to hold the repo rate at 3.50 per cent,” the bank said, adding that it will continue to monitor and analyse international and domestic developments and will take further actions as necessary.
