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 RAISES ‘REPO’ RATE TO 8.25 PER CENT
AND INCREASES COMMERCIAL BANKS’ CASH RESERVE
REQUIREMENT TO 13 PER CENT
The latest data released by the Central Statistical Office show that headline inflation, which
had been trending downward for most of 2007, picked up momentum, rising to 10 per cent on
a year-on-year basis to January 2008 from 7.6 per cent in December 2007. On a monthly basis,
headline inflation measured 2.1 per cent in January 2008, the highest monthly increase since 2003.
The current inflation spike was spurred mainly by increases in food prices but core inflation has also
risen appreciably.
Food price inflation, which has been the main catalyst of headline inflation, registered an
increase of 20.8 per cent in the twelve months to January 2008, compared with 16.8 per cent
in December 2007. Comparing the twelve-month increases ending January 2008 with those of
December 2007: the prices of bread and cereals rose by 14.1 per cent (compared with 10.4 per
cent); milk, cheese and eggs prices rose by 28.4 per cent (compared with 27.1 per cent); meat
prices rose by 13.7 per cent (compared with 12.1 per cent); the price of fish rose by 17.2 per cent
(compared with 16.9 per cent); the price of fruits rose by 34.8 per cent (compared with 28.9 per
cent); and vegetable prices rose by 30.2 per cent (compared with 22.0 per cent) (See Appendix
Table 1).
The upward movement in the food prices sub-index is reflected in price increases in a number
of basic food items. For instance, the price of cheese rose to $56.00 per kilogram in January 2008
from $47.50 in December 2007; the price of eggs (market) rose to $18.00 per dozen in January
2008 from $14.00 in December 2007 while the price of carnation evaporated milk (250 ml) rose
to $5.25 in January 2008 from $5.00 in December 2007. As regards agricultural commodities,
information obtained from NAMDEVCO also show significant price increases in January 2008 over
a range of food items (See Appendix Table 2).
Core inflation, which excludes the volatile food price component, rose in January 2008 to 5.7
per cent on a year-on-year basis from 3.9 per cent in December 2007. This represents the highest
monthly increase in the core rate of inflation since this indicator was established in 2003.
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