Joey Sarte Salceda

Economic team urged to shield poor from inflation

July 2, 2022 Jester P. Manalastas 109 views

THE economic team of President Ferdinand Marcos Jr.’s administration was urged to focus on solving constraints in the real economy and to “shield” the poor from largely external factors of inflation.

Albay Representative Joey Salceda made the appeal following the considerations of Bangko Sentral ng Pilipinas (BSP) to increase interest rates in order to address fears of spiraling inflation.

“The decision of the Central Bank on increasing rate hikes should be predicated on two things: whether the country’s inflation is caused by excess liquidity in the Philippine markets, and whether the rate hike relates to the causes of inflation in the Philippines,” Salceda said.

“For now, the answer is largely no, so we should not self-inflict a pain that is, in all likelihood, going to be futile for addressing price concerns,” Salceda added.

Salceda stressed that “year-on-year, the Q1 broad money only expanded by 7.7%, while GDP expanded by 8.3%.

According to Salceda, the real economy, for now at least, is still growing faster than our money printing.

“Money supply then, isn’t the problem with prices, as we can clearly see with the main factors: transport, fuel and energy, and food. Between inflation with growth and inflation with slower growth due to an untimely or unnecessary rate hike, I would prefer inflation with growth,” Salceda said.

“So, I would discourage those who call for more aggressive BSP [Bangko Sentral ng Pilipinas] action on policy rates. I would instead call for just enough policy rate adjustments to expand our room for action should inflation momentum accelerate further. But for now, inflation is mostly not the financial sector’s fault. So financial sector action will hardly make a dent,” he added.

The House solon also said the key is still producing enough food, finding cheaper energy, and solving transport bottlenecks.

Salceda called on the economic managers to “focus on the constraints in the real economy, and to shield the poor from the worst effects of inflation.”

“During my time as an investment banker, I sparred with some officials of the BSP on the central bank’s actions to support the peso during the years that immediately presaged the Asian Financial Crisis. Monetary policy action should relate directly to the cause of the economic incident being addressed. Otherwise, it will be costly and almost certainly futile,” he said.

Meanwhile, Salceda said he supports a “Bayan Bangon Muli” package that is more “inflation-busting” than focusing on more spending.