RECENT data on inflation released by the Central Statistical Office (CSO) indicates that headline inflation measured 6.6 per cent on a year-on-year basis, slightly up from the 6.5 per cent reported for February but still outside of the bank’s target range of 4-5 per cent.

Food prices continue to be the main driver of inflation registering an increase of 19.3 per cent year-on-year.

In this category, fruits and vegetables and fish have posted significant price increases.

Core inflation nudged up to 2.7 per cent (year-on-year) from 2.5 per cent on account of increases in medical services (8.8. per cent) and other fuels (1.5 per cent).

There are as yet no clear signs of any substantial easing in inflationary pressures.

The non-energy fiscal deficit continues to increase.

Private sector credit in a year-to-year basis to February 2006 grew by 18.5 per cent with consumer credit rising by 20.4 per cent.

While overall credit growth may be slowing consumer credit continues to expand strongly.

The bank has maintained its policy of absorbing liquidity through the issue of short and medium-term instruments.

As a result of a steady rise in domestic treasury bill rates, the differential between TT and US short-term rates widened slightly to 104 basis points in April 2006 from just under 1 per cent at the end of March.

The Central Bank considers that monetary policy needs to remain tight to address inflation pressures.

In the coming weeks the bank will discuss with commercial banks further measures to absorb liquidity and dampen consumer credit.

Against this backdrop, the bank has decided to maintain the “Repo” rate at 6.75 per cent.