Monetary Policy for September 2024
The Central Bank of Trinidad and Tobago (CBTT) has stated that economic activity in Trinidad and Tobago points to relatively buoyant non-energy output and maintenance-related decreases in some energy products. In its Monetary Policy for September, the CBTT indicated that inflation remains low.
Inflationary Developments
According to recent data from the Central Statistical Office (CSO), headline inflation slid to 0.4 percent (year-on-year) in August 2024 from 0.7 percent in June 2024. Food inflation also eased in August, decreasing to 1.5 percent from 2.3 percent in June, and core inflation, excluding food prices, decreased slightly to 0.1 percent in August from 0.2 percent in June.
Economic Activity
The CBTT noted that the performance in non-energy activities was fairly broad-based, with output statistics showing increases in wholesale and retail trade, excluding energy, transportation and storage, construction, and manufacturing. Refining and petrochemicals subsectors also experienced growth. On the other hand, declines in crude oil output were estimated at minus 11.4 percent and natural gas output at minus 10.2 percent, largely due to planned maintenance projects.
Monetary Policy
The Central Bank said that immediately following the July 2024 reduction in the reserve requirement from 14 to 10 percent, banking system liquidity rose by about three billion dollars. Liquidity then fluctuated as banks adjusted their portfolios in response to Central Bank open market operations and public sector borrowing.
The CBTT further reported that the growth in financial system credit to the private sector has been strong, with consumer lending increasing by over 10 percent from March to June. Business and real estate mortgage lending also rose by average monthly rates of 9.2 percent and 5.1 percent, respectively.
Conclusion
Considering all factors, the Monetary Policy Committee (MPC) agreed to maintain the repo rate at 3.50 percent, given the combination of low inflation, a measured economic revival focused on non-energy sectors, and the prospects for a further narrowing of the negative short-term TT/US interest differential. Consumer credit growth will require close monitoring in the coming months.
FAQs
Q: What are the inflationary developments?
A: Headline inflation decreased to 0.4 percent in August, food inflation eased to 1.5 percent, and core inflation decreased slightly to 0.1 percent.
Q: How has economic activity performed?
A: Non-energy output is relatively buoyant, with increases in wholesale and retail trade, construction, manufacturing, and refining and petrochemicals. Declines in crude oil output were estimated at minus 11.4 percent and natural gas output at minus 10.2 percent.
Q: What was the decision on monetary policy?
A: The repo rate was maintained at 3.50 percent due to low inflation, measured economic revival, and the prospects for a narrowing of the negative short-term TT/US interest differential.
Q: What concerns need to be monitored in the coming months?
A: Consumer credit growth.
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