Nov 2016 Financial News

Slight slowdown in inflation

Nov 28, 2016

A slight slowdown in headline inflation to 3 per cent was among the indicators highlighted by the Central bank in its latest Monetary Policy Announcement released yesterday.

The bank, citing data from the Central Statistical Office (CSO), said price pressures remained well contained up to September.

“Core inflation, which excludes food prices, edged upwards to 2.3 per cent in September 2016 from 2.2 per cent in August. Faster price increases within the health and clothing and footwear sub-indices led the pickup in core inflation,” the report stated.

“Conversely, food inflation slowed to 6.2 per cent by September 2016 compared with 7.2 per cent in August.” The Central Bank said since the last Monetary Policy Announcement in September, oil prices had rallied to a 15-month high of near US$50 a barrel for West Texas Intermediate (WTI) crude in October, but have declined since.

“Though oil prices generally remained low, they improved in the third quarter of 2016 and averaged US$44.9 compared to US$39.4 in the first half of the year. Meanwhile, production of crude oil and natural gas, as well as some downstream products, continued to be affected by maintenance and other stoppages by energy companies, leading to curtailed energy sector output relative to the first three quarters of 2015,” the Central Bank said.

At the same time, early indicators of non-energy sector activity in the third quarter suggest on-going softening within the construction and distribution sectors. “The latest labour force information from the Central Statistical Office (CSO) put the unemployment rate at 4.4 per cent during the second quarter of 2016 compared with 3.2 per cent in the corresponding quarter of 2015.”

The bank said after falling in October, liquidity in the financial system rose slightly this month and commercial banks’ excess reserves averaged $3.4 billion daily during the period November 1 to 21.

The report continued: “The Central Bank removed $725 million from the system through open market operations while the bank’s sales of foreign exchange to authorised dealers indirectly extracted roughly $500 million.”

The bank reported sluggish private sector credit growth in September—the fourth consecutive month of decline in lending to businesses compared with the corresponding months last year.

“In August and September, business lending registered year-on-year declines of 2.8 per cent and 1.9 per cent, respectively. Credit to the private sector by the consolidated financial sector rose to 3.5 per cent in September 2016 from 3.1 per cent in August,” the bank said.

“As at November 14, 2016, yield differentials between TT and US 91-day and 10-year Treasury securities stood at 65 basis points and 216 basis points, respectively compared with 86 basis points and 255 basis points, respectively at the end of October 2016. Meanwhile, there is a growing consensus among global financial analysts that the United States Federal Reserve will increase interest rates in the near future.”

The bank’s Monetary Policy Committee took note of overall economic conditions, the weak inflationary pressures and current and anticipated trajectory of external interest rates and decided to maintain the “Repo” rate at 4.75 per cent.

The next Monetary Policy Announcement is scheduled for January 27, 2017.

Source:
Trinidad Guardian
Saturday November 26, 2016

http://www.guardian.co.tt/business/2016-11-26/slight-slowdown-inflation