An Analysis of Inflationary Pressures in Trinidad and Tobago

Table of Contents
Executive Summary 3
Introduction 3
Current Inflationary Pressures 4
Global 4
Domestic 4
Causes of Inflation 5
Figure 1-The Oil Price and Inflation 5
The Effects of Inflation 7
A Comparison of Regional and Global Inflation Rates 8
Table 1-Annual Inflation Rates-Selected Caribbean Countries 8
Table 2-GDP per capita- Selected Caribbean Countries 8
Table 3-Annual Inflation Rates-Developed Countries 8
Inflationary Trends and Analysis 9
Figure 2- The Last Decade 9
Figure 3- Inflation and Unemployment 9
Conclusion 10
Recommendations 10

Executive Summary

Analysing the domestic inflation rate, it was found that the main driver of inflation was food prices. Rising global food prices is expected to continue to put upward pressure on local food prices and subsequently the headline inflation rate in Trinidad and Tobago. While this is a global phenomenon, developing countries are expected to be impacted harder than that of the developed nations. This is due to lower incomes as well as less developed and efficient market systems. Food accounts for a substantial portion of imports in Trinidad and Tobago therefore making us highly susceptible to imported inflation. To limit the impact of imported inflation, local agriculture and manufacturing sectors need to expand. Another contributor to the inflation rate was the average annual oil price for the corresponding year. These two variables possessed a strong positive correlation. Energy prices affect transportation and production and when they increase, the cost of final products increase. Inflation was found to reduce one’s purchasing power, as each dollar becomes less valuable over time. The best way to guard against inflation is to invest in assets that would yield a greater return than current and expected inflation