The Monetary Policy Committee (MPC) of the Central Bank is maintaining the repo rate at 3.5 per cent, after taking note of global economic conditions and the uncertainties with respect to the policy paths of major central banks.
In its monetary policy announcement on March 28, the Central Bank said the Trinidad and Tobago economy continued on a path of steady recovery, supported by good credit expansion. At the same time, inflation remained at less than one per cent and short-term interest differentials, while still relatively wide, have started to narrow.
The latest data from the Central Statistical Office (CSO) showed continued economic recovery led by non-energy activity in 2023. Real GDP rose by 3.6 per cent (year-on-year) during the second quarter of 2023, compared with 1.4 per cent in the previous quarter.
Indicators monitored by the Central Bank pointed to a continuation of that trend during the second half of the year, with relatively strong performances in the wholesale and retail and the construction sectors. Meanwhile, the CSO reported a decline in the unemployment rate to 3.2 per cent in the third quarter of 2023 compared with 3.7 per cent three months earlier.
On the price front, headline inflation rose to 0.8 per cent (year-on-year) in February 2024 from 0.3 per cent in January. With core inflation (which excludes food prices) remaining at 1.0 per cent over these two months, food inflation was registered at 0.1 per cent, compared with a small decline recorded in January.
Financial sector liquidity remained ample but skewed, alongside continued buoyancy of private-sector credit. Commercial banks’ excess reserves at the Central Bank stood at $4.5 billion in late March 2024.
Over the past few months, public-sector domestic capital market activity led to relatively large fluctuations in the liquidity positions of some financial institutions, leading them to occasionally borrow on the interbank market or the Central Bank to satisfy their reserve requirements.
In the 12 months to January 2024, financial system credit grew by 7.9 per cent, driven by lending to businesses (11.5 per cent) and consumers (9.8 per cent), while real-estate mortgage credit grew by 4.7 per cent, slower than the 6.9 per cent growth evidenced in December 2023.
In the context of government domestic financing activities, interest rates on three-month treasuries in TT have trended upwards, rising by nine basis points in January and a further 12 basis points in the six weeks to mid-March 2024. The rise in these rates has led to some narrowing in interest differentials with the US: the indicator of TT-US interest rate differentials on three-month treasuries moved to -432 basis points in February 2024 from -440 basis points in November 2023.
Globally, the International Monetary Fund said global economic growth for 2024 is forecast at 3.1 per cent. This is the same rate as estimated for 2023.
Most central banks in advanced and emerging market economies have either held their policy rates stable or have lowered their rat
