Thursday 16 July, 2020

Inflation stays low says Monetary Policy report

The Central Bank Monetary Policy report shows that inflation has remained low.

In its report, the Monetary Policy Committee said the 12-month headline rate in March 2017 was 2.8 percent, up from 2.6 percent in the previous month and close to the 3.0 percent averaged over the past six months. Core inflation was 2.6 percent (year-on-year) in March.

In giving an optimistic outlook on the economy, the report said oil production in the first quarter of 2017 was higher than over the previous three-quarters, albeit 1.6 percent lower than in the first quarter of 2016.

“There was also evidence of a pick-up in energy exploration activity which is expected to bolster output in the short to medium term. Meanwhile, natural gas production has yet to recover, with output in January to March 2017 recorded at 8.4 percent lower than the year-earlier period. Other available non-energy statistics suggest that construction and distribution activities were very subdued in early 2017.”

The report said the liquidity situation of the financial sector was relatively comfortable.

“Commercial banks’ excess reserves at the Central Bank averaged $3,441 million in April 2017 and have hovered around this level for much of May 2017. Credit growth, however, has continued to slow. Credit granted by the consolidated financial system to the private sector grew by 2.6 percent (year-on-year) in March 2017 compared with 3.2 percent a month earlier, with loans to businesses actually declining by 0.7 percent in the year to March,” the report said.     

The Monetary Policy Committee noted that the domestic economy continued to need support toward recovery and that the risk of overheating did not appear imminent in light of the recent information on inflation.

At the same time, the committee said, the narrowing of interest differentials between Trinidad and Tobago and the US has implications for the balance of payments.  

In light of these factors, the MPC decided to maintain the Repo rate at 4.75 per cent.

The next Monetary Policy Announcement is scheduled for July 28.

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