May 2011 Financial News

Central Bank announces: Inflation down to single digit

May 02, 2011

Headline inflation has fallen to 9.4 per cent, with food inflation falling to 21.3 per cent. A release from the Central Bank of T&T announced that headline inflation, measured by the 12-month increase in the Index of Retail Prices, declined to 9.4 per cent in March from 10.7 per cent in February. The release said this was the first time since May 2010 that headline inflation had fallen to single digit figure. The Central Bank also stated food inflation, the main influence on headline inflation, now stood at 21.3 per cent, dropping from 25.1 per cent in the previous month. Statistics within the food sub-index showed inflation on fruit had declined to 31.4 per cent in March, compared with 33.3 per cent in February. Inflation on vegetables had declined to 31.1 per cent in March from 33.3 per cent. The Central Bank cautioned, however, that the decline in food inflation, and in turn headline inflation, was uncertain within the coming months. Hinting at last weeks destruction of farm lands to make way for housing in the D’Abadie, Penal and Chaguanas areas, the Central Bank said:

“Inflationary expectations at the domestic level are being influenced by the loss of acreage for food crop cultivation in certain agricultural districts.” Despite a drop on inflation for fruit and vegetables, inflation on dairy products (milk, eggs and cheese), meat and sugar and confectionery products posted year-on-year increases. Data from the Central Bank showed inflation on dairy products had risen to 12.5 per cent from 11.5 per cent in February. Inflation on meat had risen to 10.7 per cent from 9.9 per cent in February and sugar and confectionery products had risen to 4.4 per cent from 3.7 per cent in February. Core inflation, which excluded the impact of food prices, fell to 2.7 per cent in March from 2.8 per cent last month. The Central Bank said this decline in core inflation was directly influenced by the decreased inflation on clothing and footwear, which dropped by 1.5 per cent.

It said the subdued rate of core inflation “testified to the sluggishness of domestic demand in conditions of ample spare capacity.” The Central Bank indicated that the steady decline in bank credit outstanding for the past 18 months had begun to bottom out. Data had shown in the last 12 months, the rate of decline of private sector credit by the consolidated financial system slowed to 1.7 per cent from 2.3 per cent in January. Regarding the private sector the Central Bank stated consumer credit continued to strengthen for the fifth consecutive month rising by 3.9 per cent. Real estate had maintained a rate of 7.7 per cent increase.

Business lending, within the private sector, was the only category that continued to register a decline of 4.8 per cent on a year-on-year basis. The Central Bank noted that on a monthly basis, credit to the business sector grew by 1.9 per cent in February, the most significant monthly increase since September 2010. The Central Bank further stated that lower domestic fiscal injection along with their adopted liquidity absorption measures had reduced the excess liquidity in the financial system. Excess private bank reserves at Central Bank had declined, as of April 28 2011, to $400 million, prompting an increase in activity in the inter-bank market. Central Bank has further decided to maintain the “Repo” rate at 3.25 per cent.


Source:
Trinidad Guardian
Monday May 2, 2011

http://guardian.co.tt/news/2011/05/02/inflation-down-single-digit