De­spite an in­crease in in­fla­tion, but amid gen­er­al­ly sta­ble glob­al eco­nom­ic con­di­tions, the Mon­e­tary Pol­i­cy Com­mit­tee of the Cen­tral Bank yes­ter­day opt­ed to main­tain the re­po rate at 3.50 per cent.

In the Mon­e­tary Pol­i­cy An­nounce­ment for June 2024, the MPC said, “Do­mes­ti­cal­ly, the low lev­el of in­fla­tion and buoy­an­cy of cred­it were sup­port­ive of the on­go­ing eco­nom­ic re­cov­ery, al­though the neg­a­tive in­ter­est rate dif­fer­en­tial war­rant­ed close mon­i­tor­ing giv­en its po­ten­tial im­pact on the coun­try’s ex­ter­nal bal­ance.”

The re­lease said that based on the lat­est da­ta from the CSO, food prices were the main dri­ver of the in­crease of head­line in­fla­tion to 0.9 per cent in May from 0.5 per cent one month ear­li­er.

The bank said, “High­er food prices were pri­mar­i­ly re­spon­si­ble for the up­ward drift of in­fla­tion. Food in­fla­tion ac­cel­er­at­ed to 3.1 per cent in May com­pared with 1.1 per cent in April 2024 on ac­count of price in­creas­es for sev­er­al lo­cal­ly pro­duced and im­port­ed food items.”

The bank al­so not­ed dip in en­er­gy sec­tor re­turned based on CSO in­for­ma­tion, as it not­ed, “CSO da­ta al­so showed a year-on-year de­cline in re­al GDP of 2.3 per cent dur­ing the third quar­ter of 2023, with con­trac­tion in the en­er­gy sec­tor (-10.3 per cent) off­set­ting the pos­i­tive per­for­mance of the non-en­er­gy sec­tor (1.3 per cent).”

The MPC stat­ed, “Pro­duc­tion in­di­ca­tors mon­i­tored by the Cen­tral Bank dur­ing the fourth quar­ter of 2023 and in­to the first three months of 2024, such as lo­cal sales of ce­ment and new mo­tor ve­hi­cle sales, point to vi­bran­cy in some non-en­er­gy sec­tors. Mean­while, da­ta from the Min­istry of En­er­gy and En­er­gy In­dus­tries in­di­cate that out­put of crude oil and nat­ur­al gas from the ma­ture fields con­tin­ued to slip over this pe­ri­od. “

The MPC once again stat­ed the liq­uid­i­ty in the fi­nan­cial sec­tor re­mained “am­ple” de­spite fig­ures drop­ping slight­ly com­pared to last year.

The re­port stat­ed, “Com­mer­cial banks’ ex­cess re­serves at the Cen­tral Bank av­er­aged $4.2 bil­lion in the first half of June 2024, mar­gin­al­ly low­er than in May 2024 ($4.3 bil­lion). There was nonethe­less some skew­ness in the liq­uid­i­ty po­si­tions of banks, lead­ing some in­sti­tu­tions to tem­porar­i­ly bor­row on the in­ter­bank mar­ket. Pri­vate sec­tor cred­it per­formed favourably, grow­ing by 6.7 per cent (year-on-year) in April 2024 com­pared with 7.9 per cent in Jan­u­ary 2024.”

The MPC said this was led by ro­bust lend­ing for mo­tor ve­hi­cles, as there was growth in con­sumer loans by 10.2 per cent which sur­passed the ex­pan­sion in busi­ness lend­ing, which stood at 9.5 per cent.

The re­port not­ed that in­ter­est rates on three-month trea­suries in T&T con­tin­ued to trend up­wards, ris­ing by 27 ba­sis points since Feb­ru­ary 2024. That re­sult­ed in the dif­fer­en­tial be­tween T&T and US three-month trea­suries mov­ing to -4.06 per cent in May 2024 from 4.32 per cent in Feb­ru­ary.

Cen­tral Bank Gov­er­nor, Dr Alvin Hi­laire, chairs the MPC.