Wednesday, May 24, 2006

PORT OF SPAIN, Trinidad: As Trinidad and Tobago continues to experience high liquidity, the latest data released by the Central Statistical Office suggest that inflation continues to be a major economic challenge for the country.

According to the central bank, on a yearly basis to April 2006, headline inflation rose to 6.9 per cent from 6.6 per cent in March. The increase in food prices measured 19.4 per cent, roughly unchanged from last month. However, its says core inflation year-on-year posted an increase of 3.1 per cent, up from 2.7 per cent last month.

According to economists and financial experts, there is continuing evidence that demand pressures may be straining available capacity in the economy. One indicator is the substantial increase in housing costs over the last quarter. While food prices are measured on a monthly basis, housing costs are only monitored on a quarterly basis.

It adds that increases in lending rates are only now beginning to dampen credit demand. The year-on-year increase in credit to the private sector slowed to 15.7 per cent according to the bank compared with 21 per cent at the end of last year.

Officials say in light of increased inflation, evidence of continuing strong demand stimulus in the economy and the relatively narrow spread between domestic and US interest rates, the Central Bank has decided to increase the 'Repo' rate by 25 basis points to 7.0 per cent. The next 'Repo' rate announcement is scheduled for June 23, 2006.

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