- Home
- Economy, Trade & Investment
- Trinidad and Tobago Headline Inflation Increased
Trinidad and Tobago Headline Inflation Increased
- By S Coward
- Published 31-Mar-08
- Economy, Trade & Investment
- Unrated
........
Increases led by fruit prices
Port-of-Spain, Trinidad -- March 31, 2008 -- According to the latest data released by the Central Statistical Office, headline inflation, measured 9.4 per cent on a year-on-year basis to February 2008, compared with 10.0 per
cent in the previous month.
Food prices, the main driver of headline inflation, increased on a year-on-year basis in February by 18.8 per cent compared with an increase of 20.8 per cent in January 2008. The increase in the food prices sub-index continues to be led by fruits (30.3 per cent on a year-on-year basis) and vegetables (21.6 per cent). There were also strong increases in the prices of fish (27.1 per cent), milk, cheese and eggs (32.1 per cent) and bread and cereals (16 per
cent).
Core inflation, which filters out the impact of food prices, remained virtually unchanged from the previous month at 5.7 per cent with the sub-indices for health, education and alcoholic beverages and tobacco posting increases of 6.8 per cent, 14.0 per cent and 13.3 per cent, respectively.
As in several countries around the world, the escalation in food prices internationally is presenting major challenges for economic and social policy. In mid-March 2008, the Government announced a reduction in the Common External Tariff on a wide range of commodities. The Government has also appointed a high-level Ministerial Committee to accelerate the implementation of decisions agreed to at the National Consultation on Food Prices held in August 2007. The agreed package of measures includes new funding
arrangements as well as fiscal incentives for farmers and the establishment of several large state farms.
These
supply-side policies complement a number of monetary tightening measures announced last month. In late February 2008, the Bank raised the cash reserve requirement of commercial banks from 11 per cent to 13 per cent and simultaneously increased the ‘Repo’ rate by 25 basis points to 8.25 per cent. Commercial banks have since responded to these measures and have increased their prime lending rates by 50 basis points to 12.25 per cent.
In addition, with effect from March 01, 2008, interest rates on new residential and commercial real estate mortgages at commercial banks have been increased by 50 basis points each.
The loan rates on new and used motor vehicles are also expected to increase. The Bank is currently examining the impact of these recent measures on liquidity and bank credit expansion to the private sector.
Net fiscal injections have continued at elevated levels and the Bank has maintained a heightened level of open market operations. Increased sales of foreign exchange have also helped to absorb excess liquidity.
The outlook for prices remains uncertain especially against the background of rising global food inflation. In all likelihood, there would be need for further demand management measures while the supply-side policies are being implemented. In addition, policy would have to address the impact of the rise in inflationary expectations, which now constitute a major challenge following the recent resurgence of food inflation - both domestically and abroad - and the weak prospects for a reversal in the short term.
The Bank has decided to maintain the ‘Repo’ rate at 8.25 per cent and will keep economic and monetary conditions under close review. The next ‘Repo’ rate announcement is scheduled for April 25, 2008.
cent in the previous month.
Food prices, the main driver of headline inflation, increased on a year-on-year basis in February by 18.8 per cent compared with an increase of 20.8 per cent in January 2008. The increase in the food prices sub-index continues to be led by fruits (30.3 per cent on a year-on-year basis) and vegetables (21.6 per cent). There were also strong increases in the prices of fish (27.1 per cent), milk, cheese and eggs (32.1 per cent) and bread and cereals (16 per
cent).
Core inflation, which filters out the impact of food prices, remained virtually unchanged from the previous month at 5.7 per cent with the sub-indices for health, education and alcoholic beverages and tobacco posting increases of 6.8 per cent, 14.0 per cent and 13.3 per cent, respectively.
As in several countries around the world, the escalation in food prices internationally is presenting major challenges for economic and social policy. In mid-March 2008, the Government announced a reduction in the Common External Tariff on a wide range of commodities. The Government has also appointed a high-level Ministerial Committee to accelerate the implementation of decisions agreed to at the National Consultation on Food Prices held in August 2007. The agreed package of measures includes new funding
arrangements as well as fiscal incentives for farmers and the establishment of several large state farms.
These
In addition, with effect from March 01, 2008, interest rates on new residential and commercial real estate mortgages at commercial banks have been increased by 50 basis points each.
The loan rates on new and used motor vehicles are also expected to increase. The Bank is currently examining the impact of these recent measures on liquidity and bank credit expansion to the private sector.
Net fiscal injections have continued at elevated levels and the Bank has maintained a heightened level of open market operations. Increased sales of foreign exchange have also helped to absorb excess liquidity.
The outlook for prices remains uncertain especially against the background of rising global food inflation. In all likelihood, there would be need for further demand management measures while the supply-side policies are being implemented. In addition, policy would have to address the impact of the rise in inflationary expectations, which now constitute a major challenge following the recent resurgence of food inflation - both domestically and abroad - and the weak prospects for a reversal in the short term.
The Bank has decided to maintain the ‘Repo’ rate at 8.25 per cent and will keep economic and monetary conditions under close review. The next ‘Repo’ rate announcement is scheduled for April 25, 2008.
