The inflation rate picture in the Philippines has drastically changed. From a peak and nine-year high of 6.7 percent in September and October last year, prices have gone down to as low as 1 percent or below in September this year, depending on the figures to be released today by the Philippine Statistics Authority.
The Bangko Sentral ng Pilipinas predicted before the release of the official figures that the inflation rate in September likely decelerated to as low as 0.6 percent from 1.7 percent in August because of lower rice prices and electricity rates.
Much has happened since inflation reared its ugly head last year. The government ordered the importation of more rice to address what appeared to be a shortage and hoarding on the part of unscrupulous traders.
The Bangko Sentral raised interest rates to force consumers to curtail spending and stop prices from further rising. The higher cost of funds, in turn, prompted businesses to shelve their expansion plans. The cycle eventually led to a slower economic growth in the succeeding quarters.
The growth-restricting measures, coupled with the enactment of the Rice Tariffication Law that liberalized the imports of the commodity, caused a deceleration in the inflation rate starting in November last year. Prices started to normalize in the succeeding months until they dropped to the 1-percent level lately.
But the high inflation figures toward the last quarter of 2018 did the damage on the economy. With rice prices surging, consumers developed a sense of uncertainty and spent less. Consumer spending, thus, slowed down and impacted on the economy.
Consumers held back on their expenses on expectations that prices of other basic commodities and services would also increase. Fortunately, consumers regained their confidence when the prices of rice and other commodities started to drop in the early part of 2019.
The Bangko Sentral has also started lowering the cost of money, while monitoring the inflation rate as part of its job to keep prices stable and conducive to long-term economic growth. Authorities should always be on the lookout for inflationary pressures, both in the domestic and external fronts. The inflation rate is one critical economic indicator that can easily influence the spending pattern of consumers.