Barbados ‘likely’ to feel fallout from rising inflation

Inflation has increased in the United States (US) and Central Bank Governor Dr Kevin Greenidge believes that based on Barbados’ fixed exchange rate and its reliance on the US market, this could negatively impact prices in the coming months.

In the Central Bank’s half-year economic review, released last Friday, Greenidge said inflation declined to 0.5 per cent “as international price pressures eased”.

However, last week, the US Bureau of Labour Statistics reported that inflation increased to 2.7 per cent as American consumers faced higher prices linked the tariffs the Donald Trump administration has imposed on trading partners.

“Because of our fixed exchange rate, . . . we are tied to the US inflation. We import about 75 to 80 per cent [of inflation] but with a lag, our research and analysis suggests a four-month lag, or so,” Greenidge said when asked if Barbados’ prices were likely to feel any fallout from this US inflation increase.

“So, those prices will eventually feed back through as we import materials and we import energy. So, that is why we expect a pick-up in inflation towards the end of this year, . . . and if you go from 0.5 to two [per cent], that’s a significant pick-up in six months. So, we do expect to see that, and we built it into our projection.”

Greenidge reminded that inflation was a general increase in prices, which meant that inflation at 0.5 per cent did not mean that prices in Barbados were not rising.

“To be honest, yes, prices remain high, they have been high for a while and I think our goal is to mitigate increases going forward, to keep them at a minimum,” he explained.

“And then make smart choices, like investing in renewable energy, . . . and also doing what we can at our own household level, [with solar] panels, and so on, to mitigate the effects of that [inflation].

“Any dynamics that feed into inflation abroad will eventually find its way into Barbados. Similarly,
if oil prices and commodity prices move up or down, those feed into inflation. We remain quite vulnerable and exposed to inflation dynamics abroad.”

In the review, Greenidge said “prices moderated across several categories, including alcoholic beverages and tobacco, furnishings and household equipment, and housing and utilities. Transport costs also declined in line with lower international oil prices”.

Inflation is expected to remain low and stable, he said, noting that “after decelerating sharply and registering only minimal price increases in the first half of 2025, domestic inflation is projected to rise gradually, with the 12-month moving average inflation rate anticipated to stabilise between 1.7 and 3.5 per cent”.