‘Temper’ notions on slowing inflation – Daza

September 7, 2022 Ryan Ponce Pacpaco 423 views

Lower rate will not ‘reduce’ price of goods

AMID recent public complaints about the astronomical prices of fuel, commodities, and everyday grocery items, House Senior Deputy Minority Leader and Northern Samar 1st District Representative Paul Daza said Wednesday that Filipino consumers seemingly received some “good news” when the Philippine Statistics Authority (PSA) released its latest Consumer Price Index (CPI) for August, which was pegged at 6.3%.

Daza said the inflation figure is slower than July’s 6.4% and marked the first slowdown in six months.

On the other hand, Daza advised the public not to take this statistic at face value and to understand its implications “better”.

“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 noted. “We should temper our expectations, though, because a comparatively lower inflation rate does not necessarily mean that consumer prices will also decrease.”

Daza pointed out that inflation measures 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 emphasized.

The August rate of 6.3% was within the Bangko Sentral ng Pilipinas’ (BSP) projected range of 5.9 percent to 6.7% for the month.

In a statement, the BSP further said that the institution is “prepared to take further policy actions to bring inflation toward a target-consistent path over the medium term” while noting that “upside risks continue to dominate the inflation outlook”.

“The BSP has already raised interest rates by 175 basis points this year, so I think they are doing their best to keep inflation within an optimal range that promotes growth without substantially reducing the purchasing power of the peso,” Daza observed.

“The priority now is to really look at other supply-side policies, as well as finding functional ways to provide aid and assistance to our countrymen who are most saddled by the cost of goods,” he concluded.