Patrick Manning, Prime Minister of Trnidad and Tobago, had targeted inflation at below 7.0 per cent. - File

PORT-OF-SPAIN, Trinidad

(Reuters):

The rate of annual inflation in Trinidad reached double digits in October, rising to 10 per cent from 9.6 per cent the previous month, the fastest pace of price rises in 12 years, the central bank said.

The central bank, which has tried to rein in inflation partially spurred by a boom in the natural gas industry of the twin island Caribbean state, said it intended to squeeze excess liquidity out of the economy, and would soon issue a TT$700 million (US$112 million) 8-year bond.

"The proceeds from the bond will be sterilised by the Central Bank, significantly enhancing liquidity conditions in the market," the bank said in a statement.

"The bank will also continue to step up open market operations through the issuance of securities of shorter maturities. Increased sales of foreign exchange to the market will contribute to the reduction in excess liquidity as well."

Food prices were the main driver of inflation in October, registering an increase of 26 per cent between October 2005 and October 2006. Vegetable prices shot up 63.4 per cent.

Core inflation, which excludes volatile energy and food prices, rose 4.7 per cent on an annualised basis.