May 2017 Financial News

Central Bank keeps repo at 4.75%

May 29, 2017

The Monetary Policy Committee (MPC) of the Central Bank decided to keep its repo rate at 4.75 per cent at its May 2017 meeting.

In a statement issued late Friday, the Central Bank said: “In its deliberations, the MPC noted that the domestic economy continued to need support toward recovery, and that the risk of overheating did not appear imminent in light of the recent information on inflation.

“At the same time, the narrowing of interest differentials between Trinidad and Tobago and the US has implications for the balance of payments. In light of these factors, the MPC decided to maintain the Repo rate at 4.75 per cent. The Bank will continue to carefully monitor and analyze international and domestic developments in its deliberations.”

The maintenance of the repo rate also involved an assessment of the evolving situation in the domestic economy, according to the Central Bank.

It said: “Oil production in the first quarter of 2017 was higher than over the previous three quarters, albeit 1.6 per cent lower than in the first quarter of 2016. There was also evidence of a pick-up in energy exploration activity which is expected to bolster output in the short to medium term.

“Meanwhile, natural gas production has yet to recover, with output in January to March 2017 recorded at 8.4 per cent lower than the year-earlier period. Other available non-energy statistics suggest that construction and distribution activities were very subdued in early 2017.”

On the other hand, the Central Bank noted: “As a result, the Fed is likely to continue its cycle of interest rate increases in the near-term. In this context, the MPC noted that the upward movement in international interest rates had not been matched by a commensurate movement in domestic rates—for example, the differential between the Trinidad and Tobago and US short-term (three- month) Treasury instruments narrowed to 29 basis points in mid-May compared with 43 basis points at end-March 2017.”

The Central Bank also pointed that the liquidity situation of the financial sector was relatively comfortable with commercial banks’ excess reserves at the Central Bank averaged $3,441 million in April 2017 and have hovered around this level for much of May 2017.

But credit growth, however, has continued to slow as credit granted by the consolidated financial system to the private sector grew by 2.6 per cent (year-on- year) in March 2017 compared with 3.2 per cent a month earlier, with loans to businesses actually declining by 0.7 per cent in the year to March.

The next Monetary Policy Announcement is scheduled for July 28, 2017.

Source:
Trinidad Guardian
Sunday May 28, 2017

http://www.guardian.co.tt/business/2017-05-28/central-bank-keeps-repo-475