NextGen Day

To lessen the impact of inflation’s ancillary effects, a member of the Bangko Sentral ng Pilipinas (BSP) Monetary Board (MB) expressed optimism that the price of food and oil-related goods would stabilize as soon as possible.

This is because rising food and oil prices continue to affect customers’ ability to make purchases, among other things, which is why petitions for pay increases have been made.

Bruce Tolentino, a member of the MB, stated that one result of the acceleration in the rate of price increases is increased transit charges and wages during the business journalism seminar held here on Saturday by the Economic Journalists Association of the Philippines in collaboration with San Miguel Corp.

The main concern, according to him, is when wage negotiation boards and labor unions push for higher wages due to the high cost of food.

He stated that because this issue is already present in some areas, “we’re hoping that it does not spread to all the areas.”

“And we hope that food prices will moderate sooner rather than later so that the pressure to ask for more (wage hikes) moderates,” the man added.

Tolentino stated that up to this point, the regional pay boards and the labor department had approved wage increases that “have been roughly keeping up with the rate of inflation.”

After reaching a 14-year high of 8.7 percent in January, the rate of price rises decreased for the third consecutive month in April, coming in at 6.6 percent.

The average annual inflation rate for the first four months was 7.9 percent.

The third quarter of this year is expected to see inflation remain over the government’s goal range of 2 to 4 percent, with an average annual rate of 6 percent predicted by monetary officials.

Tolentino claimed that changes influence the trajectory of the consumer price index (CPI) in energy and food costs.

Given that core inflation, which excludes commodities related to food and oil, is still high, analysts and authorities anticipate inflation to continue to be sticky.

According to the MB member, the average share of food items in the CPI has been roughly 38 percent in recent years.

According to him, this is higher than in other nations.

El Nino, expected to begin affecting the nation in June or July of this year and extend until the first quarter of 2024, is expected to increase the pressure on food prices.

According to Tolentino, the dry spell’s effect on inflation depends on when and where it will occur.

“If it occurs during the planting season, most of the crop will be destroyed. He added that a lesser portion of the crop will be impacted if it occurs later, emphasizing that “it also depends on where the drought will be.”

He emphasized the need for increased investments in infrastructure related to irrigation and water management. He said mitigating measures, such as understanding weather patterns, are crucial to lessen the impact of the dry period.

Tolentino stated that a 25 basis point hike in the BSP’s key rate during the MB’s rate-setting meeting on May 18 is possible because inflation is expected to continue high.

The anticipated rate increase is comparable to the Federal Reserve’s most recent increase in its benchmark interest rates. Tolentino stated that the Fed’s rate action “is always a factor that we need to consider because if the (interest rate) differential in US rates is higher, then it attracts money to go to the US.”

However, he emphasized that in addition to the fluctuations in food costs, other considerations go into evaluating their policy stance.

“We might not do it if food prices dropped dramatically overnight due to a miracle. Again, as we usually say, the data will determine the policy rate, he added.

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