Inflation in Trinidad and Tobago rises to 12.6 percent
PORT OF SPAIN, Trinidad and Tobago, Thursday July 5, 2012 – The buying power of Trinidadians continues to be eroded as inflation continues to rise, shooting up by almost 50 per cent over last year’s levels in some food categories.
According to the Central Bank’s recently released repo rate announcement, headline inflation in the twin island republic has risen from 11.8 percent in April to 12.6 percent in May.
Food price inflation remained the main driver of the headline inflation rate, accelerating from 26.1 percent in April to 28.3 percent in May. According to the report, high inflation in the food category of the Index of Retail Prices continued to be driven by increases in the retail prices of fruits and vegetable.
A year-on-year comparison showed that over the past 12-months, fruit and vegetables prices rose by a whopping 41.4 percent and 45.2 percent respectively in May. This was on top of the already 48 percent and 34.3 percent, respectively, recorded for April 2012.
The announcement also showed that higher prices increases were recorded for meat (6.1 percent compared with 4.1 in April 2012). However, several essential food items, including bread and cereals; milk, cheese and eggs; fish; and oils and fats registered slowdowns in their price increases.
The bank noted that core inflation, which filters out the effects of food prices, measured 2.2 percent in the 12 months to May 2012, the same rate as the previous month. The sub-indices for health and clothing and footwear posted slight year-on-year increases of 1.7 percent and 2.7 percent respectively in May.
The Bank said while the rise in headline inflation is a cause for concern, it has largely reflected increases in food prices and available data suggests that underlying demand pressures remain relatively contained for the time being. Noting there is still room in the current economic climate for further expansion in private sector credit to support economic recovery, the Bank said it is maintaining the repo rate at three percent.
The latest data in the report also showed some slowdown in the rate of growth of private sector credit in the financial systems. On a year-on-year basis to April, private sector credit from the consolidated financial system grew by 1.3 percent, slower than the 3.1 percent recorded in the previous month.
Among the major categories of private sector credit, the value of outstanding loans to consumers declined by 0.5 percent on a 12-month basis compared with an increase of 2.2 percent in March 2012. Meanwhile, business credit continued to expand, albeit at a marginally slower rate, growing by 4.5 percent in April 2012 compared with 4.8 percent in March. Real estate mortgage lending remained strong, increasing by 10.4 percent on a year-on-year basis in April.
Excess liquidity in the financial system contracted for the third consecutive month to June. In the first three and half weeks in June, commercial banks’ holdings of excess reserves at the Central Bank fell to a daily average of TT$2.2 billion from $2.5 billion in May and $3.4 billion in April.
Despite a substantial pick up in net fiscal injections (TT$1.4 billion in June compared with $175 million in May) Central Bank operations removed $1.8 billion from the financial system and kept excess liquidity in check.