GEISHA KOW­LESSAR-ALON­ZO

Se­nior Re­porter

geisha.kow­lessar@guardian.co.tt

The Cen­tral Bank of T&T has held its bench­mark re­po rate steady at 3.50 per cent, cit­ing low do­mes­tic in­fla­tion along­side mount­ing glob­al un­cer­tain­ty linked to geopo­lit­i­cal ten­sions and ris­ing com­mod­i­ty prices.

In its June 2026 Mon­e­tary Pol­i­cy An­nounce­ment, re­leased yes­ter­day, the Bank said its Mon­e­tary Pol­i­cy Com­mit­tee (MPC) weighed eas­ing price pres­sures at home against a wors­en­ing in­ter­na­tion­al out­look, ul­ti­mate­ly de­cid­ing to leave bor­row­ing costs un­changed.

“In its de­lib­er­a­tions, the Mon­e­tary Pol­i­cy Com­mit­tee not­ed that glob­al eco­nom­ic con­di­tions have be­come less favourable and high­ly un­cer­tain due, in part, to falling growth prospects, per­sis­tent geopo­lit­i­cal ten­sions, el­e­vat­ed in­fla­tion and tight­en­ing mon­e­tary con­di­tions.

“On the do­mes­tic front, the com­mit­tee con­sid­ered the mod­er­a­tion of eco­nom­ic ac­tiv­i­ty, slow­ing pri­vate sec­tor cred­it ex­pan­sion and low in­fla­tion con­di­tions.

“Tak­ing all fac­tors in­to ac­count, the com­mit­tee de­cid­ed to main­tain the re­po rate at its cur­rent lev­el of 3.50 per cent,” the Cen­tral Bank ex­plained.

The de­ci­sion comes against a back­drop of de­te­ri­o­rat­ing glob­al growth prospects.

The banker to the Gov­ern­ment point­ed to the on­go­ing Mid­dle East war as a key fac­tor dis­rupt­ing en­er­gy ex­ports and ship­ping through the Strait of Hor­muz, which has dri­ven up prices for oil, re­fined prod­ucts and fer­tilis­ers while in­creas­ing mar­itime costs.

These pres­sures have fed in­to a more chal­leng­ing glob­al eco­nom­ic out­look.

The In­ter­na­tion­al Mon­e­tary Fund now ex­pects glob­al growth of 3.1 per cent in 2026, down from ear­li­er fore­casts, while in­fla­tion is pro­ject­ed to rise to 4.4 per cent.

The Cen­tral Bank not­ed that this en­vi­ron­ment has al­ready prompt­ed some ma­jor cen­tral banks, in­clud­ing the Eu­ro­pean Cen­tral Bank and the Bank of Japan, to raise in­ter­est rates in re­sponse to en­er­gy-dri­ven in­fla­tion.

Do­mes­ti­cal­ly, the bank not­ed that low in­fla­tion­ary con­di­tions per­sist­ed over the first five months of 2026, re­flect­ing the de­layed pass-through of in­ter­na­tion­al price pres­sures to the lo­cal econ­o­my.

De­spite these glob­al head­winds, do­mes­tic in­fla­tion in T&T re­mains sub­dued.

Da­ta from the Cen­tral Sta­tis­ti­cal Of­fice showed head­line in­fla­tion slowed to just 0.3 per cent year-on-year in May 2026, down from 0.7 per cent in March.

Food price in­creas­es al­so eased sharply, while core in­fla­tion held steady at 0.8 per cent. Core in­fla­tion is a mea­sure of in­fla­tion that ex­cludes the most volatile prices (food).

The fi­nan­cial reg­u­la­tor at­trib­uted the mut­ed price pres­sures in part to the de­layed pass-through of high­er in­ter­na­tion­al costs to the lo­cal econ­o­my, sug­gest­ing in­fla­tion may still rise lat­er in the year as these ef­fects fil­ter through.

Eco­nom­ic ac­tiv­i­ty, how­ev­er, ap­pears to be los­ing mo­men­tum.

The bank said in­di­ca­tors sug­gest­ed over­all growth may have slowed in the first quar­ter of 2026, as con­straints in nat­ur­al gas sup­ply weighed on the en­er­gy sec­tor and broad­er eco­nom­ic un­cer­tain­ty damp­ened busi­ness con­fi­dence and in­vest­ment.

Cred­it growth has al­so mod­er­at­ed, re­flect­ing this soft­er eco­nom­ic en­vi­ron­ment.

Pri­vate sec­tor cred­it ex­pan­sion slowed to 4.0 per cent year-on-year in April 2026 from 5.3 per cent in De­cem­ber 2025, with busi­ness lend­ing show­ing the sharpest de­cel­er­a­tion. Con­sumer bor­row­ing and mort­gage lend­ing al­so eased over the same pe­ri­od.

At the same time, liq­uid­i­ty in the fi­nan­cial sys­tem re­mains am­ple. Com­mer­cial banks’ ex­cess re­serves at the Cen­tral Bank av­er­aged $4.578 bil­lion in mid-June, al­though this rep­re­sent­ed a de­cline from ear­li­er peaks in March.

The bank said it con­tin­ues to mon­i­tor liq­uid­i­ty con­di­tions close­ly, tak­ing in­to ac­count gov­ern­ment spend­ing, fi­nan­cial sec­tor ac­tiv­i­ty and cred­it trends.

Labour mar­ket con­di­tions have shown some im­prove­ment. The un­em­ploy­ment rate fell to 4.3 per cent in the fourth quar­ter of 2025, com­pared with 4.8 per cent in the pre­vi­ous quar­ter and 5.5 per cent a year ear­li­er.

The Cen­tral Bank al­so high­light­ed move­ments in in­ter­est rate dif­fer­en­tials with the Unit­ed States, not­ing that the gap be­tween short-term trea­sury rates widened fur­ther in­to neg­a­tive ter­ri­to­ry, re­flect­ing rel­a­tive­ly low­er do­mes­tic rates.

Look­ing ahead, pol­i­cy­mak­ers ac­knowl­edged that the eco­nom­ic out­look re­mains un­cer­tain, with glob­al risks tilt­ed to the down­side.

“Glob­al eco­nom­ic con­di­tions have be­come less favourable and high­ly un­cer­tain,” the bank said, point­ing to per­sis­tent geopo­lit­i­cal ten­sions, weak­en­ing growth prospects and tight­en­ing mon­e­tary con­di­tions abroad.

Against this back­drop, the bank sig­nalled a cau­tious ap­proach, bal­anc­ing the need to sup­port do­mes­tic eco­nom­ic ac­tiv­i­ty with the risk that im­port­ed in­fla­tion could in­ten­si­fy in the com­ing months.

The next mon­e­tary pol­i­cy an­nounce­ment is sched­uled for Sep­tem­ber 25, 2026.