Oct 2006 Financial News

INFLATION IS 9.6%

Oct 30, 2006

TRINIDAD AND Tobago is getting too close to that slippery slope of double-digit inflation, Central Bank Governor, Ewart Williams, warned yesterday.

So worried is he about this country's creeping approach to that unwanted territory, he lamented: "My 30 years experience at the Fund (IMF) tells me that once you get on that slope, it's difficult and it takes very harsh measures to come back and we're coming close to that.

"The latest data shows that inflation for the 12 months ending September got to 9.6 per cent (it was 9.0 per cent in August) and it was led by a 27 per cent increase year-to-year in food prices.

"Core inflation has been holding steady at under four per cent, which for us at the Bank is still too high."

Williams spoke at the press briefing for the release of the bank's Monetary Policy Report to October 2006 at the bank's Port of Spain headquarters.

However, to combat the ever-increasing inflation rate, Williams made a stirring plea to the Government, private sector and labour unions to form a pact and take seriously their roles in order to drag the debilitating figure down.

"To deal with the vicious circle of inflation ... we need to establish credibility among the various partners - between the Government, private sector and the unions, so that each of the partners is convinced that the other will keep his side of the bargain, and all of this is just euphemism for saying perhaps this is the time to think about a social contract in which the three major partners sit down and talk about how do we control inflation and what each partner's responsibility is and how do you implement it," Williams stressed.

"We have a real concern about inflationary psychology - everybody is talking about inflation now and once inflation expectations become ingrained, people try to take defensive actions.

"And you're seeing it already, in terms of transportation costs, wage demands. I'm not saying that unions are getting away with what they want... the normal wage demand now is 35 or 45 per cent and it's more than likely that there's anticipatory increase in mark-ups."

While he noted that five per cent is an inflation rate the Bank and Government aspires to seeing realised, he said care must be taken in measures adopted to bring the rate down.

And on the controversial issue of mark-ups, Williams admitted: "You'll be surprised to see the differential between farm gate prices and prices at the market... it's not politically correct to say it, but there's likely to be some issue on the size of mark-ups".

Roxanne Stapleton
The Trinidad Express
Saturday, October 28, 2006.
http://www.trinidadexpress.com/index.pl/article?id=161042067