T&T Central Bank says inflation at record low of 1.5%

The Central Bank reported Wednesday that the Trinidad and Tobago statistical office is reporting a record-breaking drop in the annualized inflation rate

It said headline inflation, which is measured by the 12-month change in the index of retail prices, was down to 1.5 per cent in November, down from 2.7 per cent in October and 14.3 per cent one year earlier.

The bank said the high inflation last year was due to "an unusual surge in prices" late in the year which caused inflation to rise. It said "even excluding the “base” effect, inflation during the period January to November 2009 fell to 1.4 per cent compared with 13.6 per cent for the corresponding period of 2008."

The bank said food inflation, which has been a major driver of the headline inflation rate, fell sharply to 0.4 per cent in November from 3.5 per cent in October.

This was due primarily to a drop in the prices of certain basic foods such as milk, cheese, eggs, bread, cereals, vegetables and meat.

The bank also reported a reduction in credit, which contributed an increase in banking system liquidity, with reserves for the period October to November 2009, averaging close to TT$3.0 billion. That's three times more than the average for the corresponding period in 2008.

The Bank has decided to lower its main policy rate – the ’Repo’ rate – by 50 basis points to 5.25 per cent. The rate is the overnight rate that banks charge for secured overnight lending.

Commercial banks use the Repo rate to determine rates for loans, mortgages and savings.

The Bank said it will continue to closely monitor the situation and "take early action to restrain inflationary pressures if circumstances so warrant". The next Repo rate announcement will be on January 22, 2010.

Full details at the Central Bank website