Apr 2017 Financial News

Central Bank keeps repo at 4.75%

Apr 03, 2017

The Central Bank’s Monetary Policy Committee (MPC) yesterday kept the repo rate at 4.75 per cent, signalling that it does not want interest rates throughout the domestic financial system to increase.

In a statement, the MPC said it “took note of the available evidence on the continued sluggishness of the domestic economy in the context of still low inflation.”

In coming to the decision to maintain the repo rate, the MPC “expressed concern about the already significant narrowing of the differential between the T&T and US short-term (three-month) Treasury instruments—from 68 basis points at end January to 41 basis points by late March 2017—given its implications for the direction of capital flows.”

In March 2017, the US Federal Reserve (Fed) increased interest rates by 25 basis points—the second hike in three months—signalling that economic gains in the US are becoming increasingly durable.

The Central Bank noted that “in the current environment, international financial market preoccupations with investment returns and safety are likely to put additional pressure on exchange rates and interest rates in emerging economies.”

After carefully balancing T&T’s economic downturn against the risk of additional pressure on the exchange rate, the MPC decided to maintain the Repo rate at 4.75 per cent.

Although the Central Bank characterised inflation as “still low,” it reported that prices throughout the economy crept up in January 2017 to 3.6 per cent year-on-year from 3.1 per cent the previous month, influenced in the main by higher prices for food items such as fish, meat and dairy products.

The Central Bank also noted that liquidity in the banking system was “fairly buoyant” in February and March 2017, in the context of a deceleration in credit demand.

“Commercial banks’ excess reserves at the Central Bank averaged $3.89 billion in February before expanding to $4.40 billion by March 27. Credit granted by the consolidated financial system to the private sector grew by 1.9 per cent (year-on-year) in January 2017—the slowest growth rate since January 2013—with loans to businesses declining by two per cent.”

The Central Bank will continue to monitor and analyse international and domestic developments in its deliberations.

The next Monetary Policy Announcement is scheduled for May 26, 2017.

Source:
Trinidad Guardian
Saturday April 1, 2017

http://www.guardian.co.tt/business/2017-03-31/central-bank-keeps-repo-475