Food drives TT inflation to 10 per cent

The Central bank of Trinidad and Tobago confirmed in a release Friday that the country's inflation rate reached 10 per cent in May, identifying food prices as the main reason for the double digit figure. The bank said food prices rose 21.8 per cent in May from 19.5 per cent in April.

The bank said on a monthly basis food prices rose by 4.0 per cent—the largest monthly increase since February 2005. It identified the main cost factors for food inflation as:

• Bread and cereals - 35.1 per cent on a year-on-year basis
• Fruit - 33.6 per cent
• Vegetables - 22.6 per cent
• Oils and fats - 20.2 per cent
• Meat (13.4 per cent).

It said the worldwide increase in the price of cereals would have contributed to the rise in the prices of rice and flour in particular. It noted that while the prices for fish and milk, cheese and eggs continued to increase, the rate of increase slowed.

In respect of fish, the bank said the rate of inflation was 25.4 per cent on a year-on-year basis to May compared with 32.6 per cent in April. The rate for milk, cheese and eggs was 25.8 per cent compared with 28.5 per cent.

"Core inflation, which filters out the effects of food prices, remained virtually unchanged from the previous month at 5.2 per cent," the bank reported.

During May, the government price increases for several basic commodities went into effect. The government agency NAMDEVCO reported significant increases in the prices for some agricultural commodities:

• Carrots increased to $10.99 per kg from $9.29
• Cassava rose to $3.44 per kg from $3.31
• Chive increased to $16.93 per bundle from $12.19

Transportation costs have also been increasing.

The bank also noted that liquidity in the financial system has been relatively tight over the past two months, causing banks to make "greater use of the inter-bank market and the repurchase facility at the Central Bank to meet their funding requirements."

It said the expansion in credit continues to be mainly in the areas of consumer and real estate mortgage loans. It said it expects the amalgamation of RBC/RBTT to inject "a sizeable amount of liquidity into the financial system as shareholders of RBTT begin to receive their cash settlements."

The bank warned that Inflation control is likely to present increased challenges over the next several months, "especially against the background of rising food and energy prices at the global level, continued fiscal pressures and increasing inflationary expectations."

It expects the situation to get worse because of the effect of the rainy season on domestic agricultural supplies.