PORT OF SPAIN, Trinidad, CMC—The Central Bank of Trinidad and Tobago (CBTT) said Friday that, based on available indicators, economic activity in the oil-rich twin island republic points to relatively buoyant non-energy output and maintenance-related decreases in some energy products.
In its Monetary Policy for September, the CBTT said inflation remains low and that recent data from the Central Statistical Office (CSO) show that headline inflation slid to 0.4 percent (year-on-year) in August 2024 from 0.7 percent in June 2024.
It said food inflation eased in August, slipping to 1.5 percent from 2.3 percent in June, and that core inflation, which excludes the influence of food prices, decreased slightly to 0.1 percent in August from 0.2 percent in June.
In terms of economic activity, the CBTT said that the performance in non-energy activities was fairly broad-based, with output statistics showing increases in the wholesale and retail trade, excluding energy, transportation and storage, construction and manufacturing, and refining and petrochemicals subsectors.
It said data from the Ministry of Energy and Energy Industries show declines in crude oil, estimated at minus 11.4 percent, and natural gas, at minus 10.2 percent output, in the second quarter of 2024, largely due to planned maintenance projects.
“The lack of available natural gas feedstock also affected refining and downstream production of liquefied natural gas, ammonia, and methanol, while urea production rose marginally,” the CBTT said.
It said that immediately following the July 2024 reduction in the reserve requirement from 14 to 10 percent, banking system liquidity, as measured by commercial banks’ excess reserves at the Central Bank, rose by about three billion dollars (One TT dollar = US$0.16 cents).
“Liquidity then fluctuated as banks adjusted their portfolios in the context of Central Bank open market operations and public sector borrowing. More recently, excess reserves reached a daily average of TT$6.3 billion in mid-September 2024.”
The CBTT said that the growth in financial system credit to the private sector has been relatively strong in recent months.
Consumer lending, in particular, grew by over 10 percent (year-on-year) from March to June 2024, with a concentration on loans for motor vehicles, refinancing, and debt consolidation.
Meanwhile, business and real estate mortgage lending rose by an average monthly rate of 9.2 percent and 5.1 percent, respectively, from March to June 2024. The continued rise in domestic interest rates on treasury bills, in light of the sustained public sector financing requirements, alongside the decline in external interest rates, led to a narrowing of the negative TT/US short-term interest differentials.
The CBTT said that this measure of relative rates on three-month treasuries moved from minus 349 basis points to minus 271 basis points between June and mid-September 2024.
“The Monetary Policy Committee (MPC) took note of the global setting, characterized by geopolitical volatility and the prospects for further monetary easing if external price stability persists.
“Key considerations domestically included the combination of low inflation, a measured economic revival focused on non-energy sectors, and the prospects for a further narrowing of the negative short-term TT/US interest differential. At the same time, the Committee observed that consumer credit was growing at a double-digit pace and needed to be closely monitored in the coming months.
The CBTT said that considering all factors, the MPC agreed to maintain the repo rate, the key policy interest rate used to influence the level of commercial banks’ interest rates, at 3.50 percent.
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