Temper expectations on decelerating inflation, public urged

In a statement, House Senior Deputy Minority Leader and Northern Samar 1st District Representative Paul Daza said the statistical data should not be taken at face value and its implications must be better understood. (File Photo: Pangarap ni Paul/Facebook)

MANILA – A lawmaker on Tuesday advised the public to temper their expectations as the country’s inflation rate decelerated to 6.3 percent last August after a five-month rise, arguing that a comparatively lower inflation rate does not necessarily mean that consumer prices will also decrease.

In a statement, House Senior Deputy Minority Leader and Northern Samar 1st District Representative Paul Daza said the statistical data should not be taken at face value and its implications must be better understood.

“On social media, there appears to be this widespread notion that there will soon be a reduction in the price of goods, and that marketing and grocery bills will now be lessened,” Daza said.

Daza explained that inflation refers to the rate of change in price levels, which means that a lower inflation rate simply indicates that prices are not rising as quickly as they were compared to the previous period.

“That’s often the tricky thing about measuring rates. In this case, it doesn’t mean that the overall trajectory has been reversed, it simply means that prices as a whole are increasing more slowly, and hopefully they will level off eventually. But that can take quite some time,” he said.

He said the government should prioritize looking into other supply side policies, as well as finding functional ways to provide aid and assistance to Filipinos who are “most saddled by the cost of goods”.

He noted that the Bangko Sentral ng Pilipinas (BSP) has already raised interest rates by 175 basis points this year which would help keep inflation within an optimal range that promotes growth, without substantially reducing the purchasing power of the peso.

Last month’s inflation rate slowed from the previous month’s 6.4 percent, bringing the average level to date to 4.9 percent, above the central bank’s 2-4 percent target. Year-ago inflation is lower at 4.4 percent.

“The August 2022 inflation outturn of 6.3 percent is within the BSP’s forecast range of 5.9 to 6.7 percent, consistent with the BSP’s assessment of elevated price pressures over the near term due to broadening price pressures,” the central bank said in a statement on Tuesday.

The BSP said its baseline projections continue to point to an above-target rate of price increases this year “with inflation decelerating back to the target in 2023 and 2024 following the recent BSP policy rate hikes.”

It said upside risks continue to dominate the central bank’s near-term inflation outlook “due to the potential impact of higher global non-oil prices, the continued shortage in domestic fish supply, the sharp increase in the prices of sugar, as well as pending petitions for transport fare increases.”

“Meanwhile, the impact of a weaker-than-expected global economic recovery as well as the resurgence of local Covid-19 (coronavirus disease 2019 ) infections are the main downside risks to the outlook,” it added.

The BSP also reiterated that adjustments in the central bank’s key policy rates, which have been increased by 175 basis points since last May, “are intended to bring inflation and inflation expectations back to the target to ensure the balanced and sustainable growth of the economy in the medium term.”

“The BSP is prepared to take further policy actions to bring inflation toward a target-consistent path over the medium-term, consistent with its primary objective to promote price stability,” it said.

The BSP also continued “to urge (for the) timely implementation of non-monetary government interventions to mitigate the impact of persistent supply-side pressures on commodity prices.”