Oct 2006 Financial News

Central Bank leaves repo at 8 per cent

Oct 30, 2006

Following is the full text of the Central Bank’s repo announcement: The Central Bank has decided to leave its “repo” rate unchanged at eight per cent following a 25-basis-point increase in the rate last month.

Headline inflation, according to the latest information released by the Central Statistical Office measured 9.6 per cent on a year-on-year basis to September compared with nine per cent in the previous month.

The food prices sub-index rose by 27.4 per cent in the 12 months to September (up from 25 per cent in August) reflecting sharp increases in basic food items including meat (10.2 per cent), fish (38 per cent), fruit (17.3 per cent) and vegetables (69.3 per cent).

Core inflation, which excludes the impact of food prices, remained virtually unchanged from the previous month holding steady at 3.9 per cent. Declines in the cost of health services and in clothing and footwear have contributed to a slowdown in the core rate of inflation since July.

The level of fiscal expenditure, excess liquidity and inflationary expectations continue to exert significant influence on domestic inflation.

After having increased the “repo” rate on eight occasions over the last nine months, the bank feels that policy should shift focus to more aggressive liquidity absorption to improve the transmission of changes in the policy interest rate.

As a consequence, it intends to concentrate on liquidity-absorption measures through increasing the issue of government securities to finance the non-energy fiscal deficit. To help effect this, the bank will expand the list of primary dealers to widen participation in open market activity and, thus, provide for better market determination of interest rates.

The bank will continue to keep monetary conditions under close review.

The next “repo” rate announcement is scheduled for November 24.

The Trinidad Guardian
Saturday, October 28, 2006.
http://www.guardian.co.tt/archives/2006-10-29/business3.html