T&T inflation hits 16.2%, highest in 27 years; core rate steady at 4.1%: Central Bank

The Central Bank of Trinidad and Tobago reported Friday that headline inflation reached 16.2 per cent in August, the country's highest inflation rate since November 1983. It was 14.1 per cent in July.

The bank said food inflation was again responsible for the high inflation, noting that heavy rains and flooding devastated food crops, pushing up prices for basic produce. Other food items also cost more in August.

Food inflation alone rose by 39.1 per cent in August, the Central Bank said, up from 33.3 per cent in July. 

Here are some examples of then rise in food inflation:

• vegetables  - up 63.4 per cent
• fruits - up 37.8 per cent
• fish - up 12.2 per cent
• milk, cheese and eggs - up 5.7 per cent
• meat - up 5.1 per cent.

When food inflation is removed from the equation, the annualised inflation rate was at 4.1 per cent, which was unchanged from the previous month, the bank said.

The bank also cut its overnight lending rate (repo rate) by a quarter of a percentage point to 4.25 per cent. The rate used to determine the cost of borrowing. The bank said the cut in the rate was in response to declining performance in the private sector. 

According to the central bank report, there was sluggish demand for private sector credit. However consumer credit increased, helped by reductions in mortgage interest rates, which kept that sector "robust". 

The slowdown has depressed credit conditions and contributed to a build-up in excess reserves over the past few months in commercial banks.

"In the first three weeks of September 2010, commercial bank reserves held at the Central Bank, in excess of the statutory limit, climbed to a daily average of $3.2 billion compared to $2.6 billion in August," the Central Bank said.

It added, "Short-term interest rates have continued to slide in the face of buoyant liquidity conditions...Recent economic indicators show no signs of a resurgence in activity in the non-energy sector."

It said it anticipates that the presentation of the national budget is likely to remove some of the uncertainty in the business environment. However the bank said it may take some time "before business confidence solidifies to provide a platform for increased private sector investment." 

It added, "Against this background of muted activity in the non-energy sector, rising unemployment, still declining credit demand and relatively stable core inflation, the bank has decided to reduce the repo rate...to help stimulate domestic demand and private investment."