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EASING
interest rates may not be the best way to counter
significant increases in fuel and commodity prices, such
as the cost of rice, but monetary policy may have to
change if there are symptoms that these are already
causing second-round effects.
Bangko
Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr.
said Thursday the most significant risk to the country’s
inflation, which rose to a sizzling 6.3 percent in March
from last year’s average of 2.8 percent, still comes
from oil and commodity prices.
“As you
are aware, these [high inflation] are supply-side
factors for which monetary policy is probably not the
best tool to use,” Tetangco said.
“However, we continue to be vigilant to guard against
second-round effects of the higher commodity prices.”
The
policymaking Monetary Board (MB) of the BSP will hold
its meeting on April 24, when it will decide whether or
not to change the current interest rates.
The MB
will be under pressure to cut rates since the country’s
inflation rate has already breached the BSP’s target
range of 3 percent to 5 percent average for the entire
year.
Asked if
the BSP is concerned more on inflation over economic
growth on its policy stance, Tetangco said the BSP will
have to follow its primary mandate of ensuring low and
stable prices.
“But we
are always mindful that we need to balance this so that
a stable macro environment is sustained that would allow
the real economy to continue to grow,” he said.
Another
BSP source said the central bank has recognized the need
to make upward adjustments in both the wages and the
transport fare—thus the second-round effects of
inflation—but monetary authorities need to balance
things to keep the situation from getting out of hand.
The
source explained that even if wages were increased,
which will result in higher prices of basic goods, there
won’t be any benefit to the workers.
“Here is
your ordinary laborer, getting [additional] P25 a day,
but paying P30 to P35 more in terms of higher
[commodity] prices. We have to be careful,” the official
said, adding that the same applies for the
transport-fare hike.
The BSP
included in its projection a 7-percent increase in
current minimum wage of P362 per day, which translates
to about additional P25. |
