April 2008 Report - Central Bank of Trinidad and Tobago

CENTRAL BANK OF TRINIDAD AND TOBAGO MONETARY POLICY REPORT APRIL 2008
POST OFFICE BOX 1250 PORT-OF-SPAIN, TRINIDAD, WEST INDIES
TELE: 625-4835, FAX: (868) 623-1955
E-Mail Address: info@central-bank.org.tt
Media Release
CENTRAL BANK MAINTAINS ‘REPO’ RATE AT 8.0 PER CENT
The latest data released by the Central Statistical Office indicate that headline inflation
measured 7.3 per cent (year-on-year) in October 2007, the same rate as in the previous month.
Food prices, the main stimulus to headline inflation, registered a year-on-year increase of 16.6
per cent in October from 14 per cent last month. On a monthly basis, food prices rose by 2.4 per
cent – the second largest increase for the year to date. The main contributors to food inflation were
increases in the prices of bread and cereals (8.3 per cent), meat (15.6 per cent), vegetables (19.9 per
cent), fish (19.9 per cent) and milk, cheese and eggs (22.2 per cent). The data also show that there
were slower price increases for fruit (30 per cent compared with 32.8 per cent in September) and
sugar and sugar-based products (5.6 per cent compared with 6.4 per cent).
Core inflation which had been hovering between 4.5 and 4.6 per cent for the last five months
fell by a percentage point (the largest recorded decline for the year) to 3.7 per cent in the twelve
months to October 2007. More subdued increases in the cost of transportation, housing services,
health services and in the prices of alcoholic beverages and tobacco contributed to a lower core
inflation rate. By contrast, the sub-indices for Education and Hotels, Cafes and Restaurants posted
year-on-year increases of 14 per cent and 14.4 per cent, respectively.
Net fiscal injections rose sharply in October and November but liquidity in the financial system
was kept relatively tight as the Bank withdrew TT$2.4 billion in November through open market
operations and foreign exchange sales. Notwithstanding this significant liquidity absorption, bank
credit is still expanding at a relatively uncomfortable pace. In the twelve months to September, bank
credit expanded by 21.1 per cent compared with 19.4 per cent in the previous month. The sharp
increase in bank credit partly reflects a significant upsurge in consumer credit especially for the
purchase of motor vehicles and for home renovation.
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