Central Bank Of Trinidad & Tobago To Keep Rate At 3.50% Even As Inflation Climbs

• After keeping its repo rate fixed at 3.50% at its meeting on March 31 2023, Fitch expects that the Central Bank of Trinidad & Tobago (CBTT) will leave the policy rate unchanged for the remainder of 2023.
• Prior to October 2022, the government of Trinidad & Tobago (T&T) had worked to lower the burden of high inflation with subsidies. The CBTT has not pursued a rate hiking cycle during the COVID recovery like some of its Caribbean neighbours and despite climbing inflation, which has worsened after the removal of government subsidies, the CBTT still held its policy rate at 3.50%.
• While the Central Bank of Trinidad & Tobago has taken account of the significant rise in inflation and the interest rate differential, it has indicated that it will keep rates lower in order to support borrowing and the continued post-pandemic economic recovery.
• The CBTT also cited concerns about spillovers from the US banking sector crisis and damaging effects on the island’s growth and therefore did not want to add additional pressure to the banking system.
• Given these factors, Fitch forecasts that headline CPI will average 8.0% in 2023, and end the year at 4.8% y-o-y as demand softens. However, risks to their forecast are towards higher interest rates if energy prices do not come down, but remain elevated through 2023.

(Source: Fitch Solutions)