PORT OF SPAIN, Trinidad and Tobago, Thursday, March 29, 2012 – Despite having a robust domestic agricultural base, rising food prices are driving Trinidad and Tobago’s inflation through the roof.
According to data from the Central Statistical Office, there was a marked acceleration in the inflation rate in February, reflecting a broad-based increase in food prices.
On a year on year basis, food inflation reached 20.2 per cent in February 2012, compared with 14.0 per cent in January. The lingering effects of adverse weather conditions in earlier months on supplies of domestically produced crops continued to be reflected in the prices of vegetables and fruits. At the same time, international price developments appear to have been gradually affecting domestic prices either directly in the case of dairy products or indirectly via higher costs of animal feed.
As a consequence, in February, the 12 month increase in the price of fruit was 53.9 per cent, vegetables 24.5 per cent, milk, cheese and eggs 8.6 per cent, and meat 6.9 per cent. Reported reductions in fish catches also contributed to the 13.6 per cent rise in the selling price of fish.
The data show that, so far, prices of other goods and services have not generally mirrored the movements in food prices. There was a slight decline in the 12-month rate of increase in the sub-indices for clothing and footwear and for alcoholic beverages and tobacco in February 2.8 and 2.2 per cent, respectively, relative to January (3.2 and 2.5 per cent, respectively.
The recovery in private sector credit continued into January 2012, albeit at a slightly, slower pace. On a year on year basis, credit granted by the consolidated financial system to the private sector grew by 3.4 per cent in January, following an increase of 3.7 per cent in December 2011.
As regards the major categories of lending, the recorded 12-month increase in January was 8.7 per cent for real estate mortgage lending, 5.7 per cent for business credit, and 2.5 per cent for consumer credit.
According to the central bank, lower interest rates and more active marketing by banks geared to sustaining their loan portfolios contributed to the buoyancy in private sector credit.
Despite some expansion in credit, liquidity in the domestic financial system remained very high.
Commercial bank balances at the central bank in excess of required levels averaged just over TT$5.1 billion in February 2012, peaking at over TT$6.5 billion in early March. The rise in liquidity levels was due in part to net domestic fiscal injections, which reached approximately TT$3 billion in the period February to mid-March.
In an effort to absorb some of this liquidity, the central bank withdrew TT$1.5 billion through voluntary deposits by the commercial banks on March 16, 2012. The bank announced that it would be employing additional liquidity absorption measures over the next few months to contain excess liquidity levels.