Download - Repo Rate February 2011
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`bkqo^i=_^kh=lc==qofkfa^a=C=ql_^dl=POST OFFICE BOX 1250 PORT-OF-SPAIN, TRINIDAD, WEST INDIESTELE: 625-4835, FAX: (868) 623-1955E-Mail Address:[email protected]
MediaRelease
INFLATION SLOWS TO 12.5 PER CENT: CENTRAL BANK
LOWERS REPO RATE TO 3.25 PER CENT
RecentdatareleasedbytheCentralStatisticalOfficeindicatethatheadlineinflation
measuredbythe12monthincreaseintheIndexofRetailPricesslowedto12.5percentin
January2011 from13.4percent inDecember2010. Core inflation,whichhadremained
virtuallyunchangedforthepastseveralmonths,declinedto2.6percent(yearonyear)in
Januaryfrom4.7percentinthepreviousmonth.
Onayearonyearbasis,foodpricesincreasedby30.9percentinJanuary,slightlyup
from
29.5
per
cent
in
December.
The
rise
in
food
prices
was
led
mainly
by
vegetables
(51.0
per cent) andmeat (10.2 per cent). Within the vegetables subindex, significant price
increaseswererecordedfortomatoes(92.6percent),greenpigeonpeas(103.0percent),
christophene (106.9per cent) andochroes (77.0 per cent). The rateofprice increases
however slowed for fruits (26.3 per cent in January compared with 32.4 per cent in
December)andfish(7.2percentinJanuarycomparedwith7.9percent).
The slower rate of increase in core inflation reflected movements in the
transportationsubindex, largelydue to technical factors. Therewasasurge in thissub
indexinJanuary2010followingtheinclusionofcumulativeincreases(betweenJanuaryand
December2009)inthepricesoffuelsandlubricants. Thiselevatedlevel,whichformsthe
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basefortheyearonyearcomparison,nowgivesrisetoasignificantlyslowerannualrateof
increaseinthetransportationsubindexinJanuary2011(1.9percent)comparedwiththe
average of 11.3 per cent throughout 2010. Besides this base effect, therewere also
slowerprice increases inothernonfoodcategories includingHealthandFurnishingsand
HouseholdEquipment.
Underlyingdemandpressures continue tobe fairly subdued as reflectedby credit
developments. In the twelve months to December 2010, private sector credit by the
consolidated financial system contracted by 2.3 per cent led by business credit,which
declinedforthefourteenthconsecutivemonthby7.2percent. Informationatamoredis
aggregatedlevelrevealsthattherewasadeclineinlendingtoallthemajorbusinesssectors
includingmanufacturing(0.4percent),construction(8.9percent)anddistribution(11.4
percent). It shouldbenotedhowever that consumer credithasbegun to recoverand,
after monthly increases of just above 1.0 per cent in the past two months, has
strengthenedsignificantlyinDecember2010,risingto4.2percent.
Net fiscal injections, themajor sourceofdomestic liquidity,havebeen somewhat
lower
for
the
first
five
months
of
the
fiscal
year
and,
combined
with
the
liquidity
absorption
measuresundertakenbytheCentralBank,haveservedtoreduceexcessliquidity. Forthe
monthofFebruarythusfar,commercialbanksreservebalancesheldattheCentralBankin
excess of the statutory limit averaged $1.4 billion daily compared with $2 billion in
December2010.
In the somewhat tighter liquidity environment, the threemonth treasury bill has
inchedupoverthepastfewmonthsfromitshistoriclowof0.28percentinOctober2010
to0.47percentinFebruary2011.
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Inflationrisksarelikelytoremainontheupsideinthecomingmonthsfollowingthe
sharp increases intheglobalpricesofsomekeyfoodstaplessuchaswheat,maize,sugar
andedibleoils. Severalof theseprice increaseshavenotyetbegun to impactdomestic
foodprices. Inaddition,thereare indicationsthatprivatedemandhasbeguntopickup.
TheBankwillkeepaclosewatchon theevolutionof the creditand liquidityaggregates
whichhaveimplicationsforaggregatedemandandcoreinflation.
Meanwhilewiththerecoveryofthenonenergysectoractivityremaininganurgent
priority,theBankhasdecidedtoreducetheReporateby25basispointsto3.25percent.
TheBankwillcontinuetokeepeconomicandmonetaryconditionsunderclosereview.
ThenextReporateannouncementisscheduledforMarch25,2011.
February25,2011.
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APPENDIX
MOVEMENT OF SELECTED CATEGORIES OF THE INDEX OF RETAIL PRICES
/Percentage Change/
Monthly Year-on-Year
December2010
January2011
December2010
January2011
Headline Inflation0.5 1.1 13.4 12.5Food Prices 1.3 2.4 29.5 30.9
Bread and Cereals 0.5 0.2 (0.7) (0.4)
Meat 4.5 0.0 9.4 10.2
Fish 2.1 2.6 7.9 7.2
Vegetables 0.3 4.3 42.5 51.0
Fruits 1.6 6.6 32.4 26.3
Milk, Cheese & Eggs 1.5 0.0 11.3 11.3
Oils and Fats (1.1) 0.0 (2.8) (3.1)
Sugar, Jam, Confectionery,
etc.0.2 0.4 4.1 3.9
Core Inflation (0.1) 0.2 4.7 2.6
Alcoholic Beverages &Tobacco
0.1 0.3 6.0 6.2
Clothing and Footwear (0.8) 0.5 (1.5) (1.7)
Furnishings, HouseholdEquipment and RoutineMaintenance
0.0 0.0 1.0 0.6
Health 0.0 0.1 3.8 3.7
Of which: MedicalServices 0.0 0.0 6.0 5.7
Housing, Water,Electricity, Gas & OtherFuels
0.0 0.4 0.2 0.7
Of which: Rent 0.0 3.1 7.0 5.9
HomeOwnership
0.0 0.1 (0.8) 0.1
Education 0.0 0.0 1.9 1.9
Recreation & Culture 0.0 0.0 13.7 14.0
Hotels, Cafes &Restaurants 0.0 0.1 0.8 0.4
Transport 0.0 0.0 12.1 1.9Source: Central Statistical Office.