Inflation target of 6 per cent 'bold'

Published: Friday October 3, 2008

Financial accounting firm Ernst and Young has described Finance Minister Karen Nunez-Tesheira's long-term inflation target of six per cent as "bold".

In their post-budget report the company said, though the Minister stated this was the Government's long-term goal, they saw it as only a bold target as she said so "without elaborating on how this was going to be achieved."

Inflation reached a high of 13.5 per cent in August.

Ernst and Young said in the present climate of high expenditure, low agricultural output, global commodity price inflation and the declining power of the US dollar, local inflationary pressure is being precipitated, yet the Minister reset the government's inflation target at six per cent, lower than their initial yet-to-be-attained target of seven per cent.

However, despite the changing target, no actual plan to ease the inflationary pressure citizens are living under currently was announced.

While the company made mention of several initiatives which the Central Bank of Trinidad and Tobago has undertaken in recent time to help curb the inflationary trend, its representatives said one can expect, that in the short term, workers throughout the country will be demanding larger wages.

The report said, "In the short term one could reasonably expect that wage pressures will increase due to workers entrenched inflationary expectations."

However, Ernst and Young, like several economists, said wage increases would further increase production costs (and increase product prices), which will once again be passed on to the consumer, further exacerbating the inflation situation.

The company did praise the government's decision to increase the national pension and public assistance grants, as they said this year's increases, combined with those given last year, will go some way in "alleviating the distress caused by inflationary increases in food prices, transportation costs and the costs of other basic necessities."

However, the report tagged these as "curative" steps in the fight against inflation but not "preventative" measures.


Source:
Aretha Welch
Trinidad Express Newspapers
http://www.trinidadexpress.com/index.pl/article_business?id=161382969
awelch@trinidadexpress.com