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.