Food inflation could continue in 2022

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In this archive photo, Liza De Verteuil is shopping in Massy, ​​Mandalay, Arima stores. – Photo by Angelo Marcelle

There could be further increases in food and core inflation by 2022.

But there is also cautious optimism about the economic recovery in Trinidad and Tobago next year, once the gradual reopening of the economy continues.

The central bank expressed this view in its latest monetary policy announcement (AMP) on Friday, the definitive AMP for 2021.

After a delay of several months, the bank said external price pressures are currently having a direct and widespread impact on domestic inflation. Headline inflation hit 3.9% year-on-year in October, down from 2.4% a month earlier.

“Food inflation jumped to 7.6 percent from 5.8 percent in September and is expected to rise further given the situation in world grain markets.”

As a result of this development, National Flour Mills (NFM) announced on Wednesday that its wholesale price would be increased by 15 to 20 percent and suggested a 19 percent increase in the retail price of flour.

On Thursday, NFM said the increase in the retail price of its hibscus flour would be 17%, not the original 19%. Kiss Baking Company has said the price of some of its products will increase by 9%. Linda’s Bakery has said a price increase for its products will be determined next month.

The bank said core inflation, which excludes food items, nearly doubled to 2.9% from the previous month.

“Stronger price pressures were also seen for building materials, with the building materials price index rising 12.6% in the third quarter of 2021 compared to the same quarter a year earlier.”

The bank also said: “At the national level, commercial operations are starting to recover after the gradual opening of the economy since the third quarter, a signal of cautious optimism for 2022 if this momentum continues.”

On financing, the bank said business lending increased 1.3% year-on-year in October 2021, the first increase since August 2018. “Recent lending has been particularly buoyant for the banking sectors. construction, finance and mortgage lending cent increases.

But the bank said: “Consumer loans contracted 2.3%, despite a slight drop in interest rates. The weighted average lending rate of commercial banks fell to 7.04% in September, or 16 basis points lower than in March.

Liquidity in the financial system remained plentiful, with commercial bank excess reserves at the central bank averaging $ 7.37 billion in the first half of December. In addition, the bank said the interest rate differential between Trinidad and Tobago and 90-day U.S. Treasuries was

relatively stable at around 27 basis points since June.

After taking note of domestic economic developments, including the resumption of trade operations in a more open framework and the transmission of external inflation to local prices, the bank’s monetary policy committee decided to maintain the repo rate. at 3.5%.

The bank committee also felt that TT’s economic outlook as we enter 2022 was clouded by significant uncertainty about the path covid19 will take in the future.

From a global perspective, the bank said global inflationary pressures, mainly driven by constraints on the supply side, increased in the second half of 2021.

“Such pressures have led to tightening monetary policies in several countries.”

These include the United States (with inflation above its 2% target for the ninth consecutive month) and the United Kingdom, where the Bank of England raised its key rate by 15 basis points to 0. , 25%, the first rate hike by a major central bank. since the start of the pandemic.

The bank observed that emerging and developing economies continued to raise interest rates, to cope with domestic inflation and in anticipation of the potential impact of rising interest rates in advanced economies on capital flows.

At the same time, the outlook for global growth has darkened with the emergence of the rapidly spreading omicron variant of covid19, with some countries reverting to difficult travel and other restrictions on mobility and economic activities. “

The next AMP is scheduled for March 25.

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