IF Filipinos want to save, they should buy local goods as imported goods have become more expensive, according to the Bangko Sentral ng Pilipinas (BSP).
In a recent forum, BSP Governor Felipe M. Medalla said the peso is considered the “shock absorber” of higher prices. This makes imported goods more prohibitive because foreign exchange rate costs are passed on to consumers.
Medalla said buying local also means purchasing items from firms even if they also purchase inputs from other countries like China, since these still make use of Philippine labor.
“We of course allow the peso to be the shock absorber because in some cases, the best way to control [high prices] is encourage Filipinos to buy local,” Medalla said.
Medalla said, however, that allowing the peso to depreciate at a fast rate may also not be a good thing. This, he explained, is where increasing policy rates come into play.
“That’s why letting the peso adjust to reflect market fundamentals is a good idea except [when the pace of adjustment of the] exchange rate is too fast. That’s why we have two policies: one is, the Central Bank sells dollar so that the peso’s rate of depreciation isn’t too steep; the other one is [we won’t raise] interest rates [too much] so that the peso decline is not too much,” Medalla told reporters.
The BSP expects inflation to “normalize” by around November this year, the data for which will be released by December 2023. Medalla said the inflation print in January when inflation reached 8.7 percent was “such a huge surprise” and “chased the calculus.”
In January, inflation was the highest since November 2008 when inflation clocked in at 9.1 percent. Headline inflation slowed in February to 8.6 percent but core inflation continued to climb.
Economists earlier said core inflation is the indicator to watch as it reached 7.8 percent in February. The Philippine Statistics Authority (PSA) said this is the highest since March 1999 when it was at 8.1 percent.
Core inflation measures inflation for commodities that are not volatile and excludes certain food and energy items. The movements also lag those in prices of energy and food.
