With Trinidad and Tobago’s headline inflation remaining stable in the third quarter of 2022, the country’s central bank announced that it will keep its repo rate fixed at 3.5 per cent.

The Central Bank of Trinidad and Tobago (CBTT) shared the decision of its monetary policy committee (MPC) on December 30, 2022, noting that the committee is “balancing all considerations”.

“The central bank will continue to monitor both international and domestic developments and will take further actions as necessary,” it said.

On the international side, the central bank said it has factored in “multiple headwinds” from the global economy in 2022, such as spillover effects of the Russia-Ukraine war, a drastic slowdown in economic activities in China and widespread inflationary pressures weighing on global growth. Additionally, the bank pointed to supply chain disruptions fuelling the inflation of food and fuel prices and central banks tightening monetary policy.

At the domestic level, the local economy continued to grow at a gradual pace with new gas exploration activities expected to boost production in the energy sector. At the end of November, British Petroleum Trinidad and Tobago (bpTT) LLC delivered first gas from the Cassia C development on the Trinidad’s south-eastern coast.

At the same time, business activity and consumer demand in the non-energy sector continue to strengthen.

“There is good evidence that financing for business expansion is improving. Financial system credit to businesses rose by 9.6 per cent in October 2022 on a year-on-year basis. Banking system liquidity is also quite high in mid-December ($7.1 billion in excess reserves at the Central Bank),” the financial institution outlined.

Notwithstanding, with the unemployment rate climbing from 4.5 per cent at the end of June to 5.4 per cent in the third quarter, the central bank described the labour market as being “sluggish”.

Additionally, the CBTT noted that food inflation reached 11.6 per cent while core inflation was 4.8 per cent as at September.

“External influences continued to dominate the trajectory of domestic inflation in the first nine months of 2022. A combination of imported commodity prices, flooding and the impact of the reduction in the subsidy on local fuel prices is expected to lead to further price rises during the final quarter of this year,” the bank outlined.

Consistent with the bank’s forecast that the price of fuel will rise, the Energy Chamber of Trinidad and Tobago in October argued that the removal of the fuel subsidy will not only trigger the expected rise in the prices of fuel but also significantly lower volumes of diesel and gasoline sales.

Commenting on the MPC’s overall assessment, the CBTT explained, “The committee recognised that tremendous uncertainty characterised expected geopolitical developments into 2023, while financial markets remained unsettled. Domestically, business operations were poised to rebound further, supported by bank credit and potentially some of the additional fiscal space afforded to the Government from higher energy prices. The MPC however noted with concern the rising path of domestic inflation, albeit dominated in 2022 by external or weather related shocks as well as the fuel subsidy reduction.”

In this regard, the MPC has recommended that the central bank prepare to “further employ other monetary tools…in addressing the inflationary situation in a flexible manner”.

The CBTT will announce its next decision in the next 12 weeks, as per the meeting of its MPC.