Dec 2007 Financial News

Inflation up again to 8.1 per cent

Dec 21, 2007

The inflation rate rose to 8.1 per cent at the end of November 2007, according to a report yesterday from the Central Bank. That represented an increase from 7.3 per cent at the end of October.

Once again, increasing food prices proved to be the culprit.

Citing data from the Central Statistical Office, the Central Bank said food prices increased to 18.7 per cent in November from 16.5 per cent in October, a monthly increase of 3.4 per cent, the largest increase since September 2006.

The report said increases—some of them “hefty”—in the prices of fruits, milk, cheese and eggs, vegetables, bread and cereals and sugar and sugar-based products were the main causes of food price inflation.

Central Bank maintains Repo Rate at 8.0 per cent

Recent data released by the Central Statistical Office indicate that headline inflation, measured by the 12-month increase in the Index of Retail Prices, rose to 8.1 per cent in November 2007 from 7.3 per cent (year-on-year) last month.

This increase was led by food prices which rose by 18.7 per cent (year-on-year) in November from 16.5 per cent in October. On a monthly basis, food prices rose by 3.4 per cent—the largest increase since September 2006. On a year-on-year basis to November, increases in the prices of fruits (36.3 per cent), milk, cheese and eggs (26.2 per cent), vegetables (24.6 per cent), bread and cereals (8.8 per cent) and sugar and sugar-based products (6.4 per cent) were the main contributors to food price inflation.

As regards the vegetables sub-index, there have been hefty increases in the prices of cucumbers (95.4 per cent), green pigeon peas (58.3 per cent) and carrots (13.5 per cent).

NAMDEVCO, in its ‘GreenVine’ bulletin for November 2007, notes that the prevalence of viral diseases (resulting from inclement weather conditions) has affected the supply of certain food crops, especially tomatoes and cucumbers.

Core inflation inched up to 3.9 per cent on a year-on-year basis to November from 3.7 per cent in October.

The up-tick in the core inflation rate reflected higher prices for alcoholic beverages and tobacco (12.1 per cent) and clothing and footwear (3.9 per cent) as well as the increased cost of health services (4.9 per cent).

In the 12 months to November, the price of beer rose by 16.2 per cent from 6.7 per cent in the previous month. The increase in beer prices in mid-October by one of the large domestic breweries, along with strong demand associated with the Christmas season, has contributed to the higher prices for alcoholic beverages.

The increase in food prices has become a major challenge for many developed and developing economies. In addition to supply shortages created by inclement weather and the shift in utilisation of agricultural commodities from food production to bio-fuels, many other developing countries including Trinidad and Tobago are feeling the effects of the depreciation of their respective domestic currencies against non-dollar currencies.

Several countries have begun to take steps to contain imported inflation by reducing duties on imported food items. In the case of Trinidad and Tobago, however, the scope for further reduction in import duties remains relatively limited.

Global projections suggest continued increases in international food prices. These projections underscore the need for Trinidad and Tobago to control the domestic sources of inflation by increasing agricultural supplies and taking steps to contain demand pressures.

Whereas open market operations and increased sales of foreign exchange will continue to be

major pillars of the Bank’s monetary policy arsenal, additional measures will need to be taken to keep inflation within the targeted range.

The Bank has decided to maintain the current “Repo” rate at 8.0 per cent while keeping monetary conditions under close review.

The next ‘Repo’ rate announcement is scheduled for January 25, 2008.

Source:
The Trinidad Guardian
Friday 21st December, 2007

http://www.guardian.co.tt/business1.html