PORT OF SPAIN, Trinidad– The Central Bank of Trinidad and Tobago has announced that it is maintaining the country’s repo rate at 3.50 percent.
In announcing on Friday, the bank noted that this is being done while other central banks worldwide have increased their key interest rates to dampen spiraling inflation.
“Leading the charge, in its latest move, the United States Federal Reserve (US Fed) hiked the Fed funds target range by 75 basis points to 3.00 to 3.25 percent in September 2022.”
According to the Central Bank, the spillover to financial markets has been severe, with tremendous volatility experienced in equity valuations and exchange rate pressures in several countries.
“Domestically, Central Statistical Office (CSO) data point to a marginal decline in real GDP by 0.1 percent (year-on-year) in the first quarter of 2022. Energy sector output contracted by 5.1 percent while non-energy GDP increased by 2.2 percent. Non-energy growth was driven by strong performances in the manufacturing and transport and storage sub-sectors. Declines hampered the energy sector in natural gas production and LNG refining. The unemployment rate measured 5.1 percent in the first quarter of 2022, compared to 4.9 percent in the previous quarter.”
It was noted that headline inflation rose to 5.9 percent (year-on-year) in July 2022, up from 4.9 percent in June.
“The price rises were fairly broad-based. Food inflation reached 10.3 percent in July while core inflation (which excludes food items) measured 4.9 percent. The first round effect of an increase in fuel prices in late September is expected to be reflected in the inflation outcome in the final quarter of this year.”
The Central Bank said that monetary and financial indicators indicate ample liquidity and strengthening credit demand. Commercial banks’ excess reserves at the Central Bank amounted to $4.4 billion in mid-September 2022.
“ This was driven by robust growth in business loans, a turnaround in consumer credit, and buoyant real estate mortgage lending. On the business side, there were notable increases in loans for construction, manufacturing, and distribution.
In the context of US Fed policy moves, the TT/US interest differential on three-month treasuries reached -236 basis points in August 2022.
In its deliberations, the Monetary Policy Committee (MPC) took note of the current uncertainty on the global front and inflationary pressures that were spilling over to Trinidad and Tobago.
“ At the same time, there were encouraging signs of a revival of credit supporting domestic business expansion. Taking all factors into account, the Committee decided to maintain the repo rate at 3.50 percent. The statement noted that the Central Bank would continue to monitor international and domestic developments and take further actions as necessary,” the statement noted.
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