Wolf at door

For us dummies, or politely laymen, inflation jargon and argot give us headaches.

But generally, inflation apparently agitates and upsets us.

In a recent Pulse Asia survey, 57 percent of Filipino adults confess their top worry is inflation, which has climbed to a level not seen since October 2018, at 6.1 percent in June.

We are justly nervous something isn’t right when prices shoot up across the economy, particularly prices of everyday necessities.

Before anything else, rising prices associated with inflation is caused by either “demand-pull inflation” or “cost-push inflation.”

Both causes hark back to the fundamental economic principles of supply and demand.

We’ll have to set aside “demand-pull inflation” since the pains we’re now enduring is plainly marked “cost-push inflation.”

“Cost-push inflation” is when supply of goods or services is limited in some way but demand remains the same, pushing up prices.

Usually, some sort of external events excite “cost-push inflation.” In our present

circumstances, that external event seems to be high oil prices, which is largely blamed on the protracted war in Ukraine.

We all need precious oil. But the Ukraine war drastically reduced worldwide oil supplies and pushed gas prices up since worldwide demand remained the same as oil supplies shrunk.

Oil prices in fact determine how soon we’ll have tolerable inflation again. The Budget department, for instance, calculates 2023’s inflation rates as hovering between 2.5 percent to 4.5 percent if the price of Dubai crude oil is around $80 to $100 per barrel.

Inflation is expected to go even lower in 2024 if Dubai crude oil prices go down further, between $70 to $90 per barrel.

Anyway, so upset are we about inflation we want the new administration to take steps to control inflation, and quickly, too.

No doubt quickening inflation is a political liability for Mr. Marcos Jr., who is widely expected to acknowledge the pressing problem in his first State of the Nation Address (SoNA) on Monday.

But while Mr. Marcos Jr. is likely to commiserate with Filipinos over rising prices, there remains little that he can do unilaterally to tame inflation in the short term.

This, even if it looks as if his officials are all over the place trying to bring prices down.

Still, even without many concrete policy levers to bring prices down, Mr. Marcos Jr. can use his presidential pulpit to advocate policies which may eventually ease inflationary pressures.

Mr. Marcos Jr. as president does have powers to advocate for sound inflation policies and herd industry and political leaders together to tackle inflation.

What those policies are, and whether those are sound enough to solve underlying issues or not, we should see after the SoNA.

But the political advice at the moment is for him to appear he’s doing something. People are just too upset and they want the President to solve their problems.

Anyway, the awkward fact is that taming inflation is the job of the Bangko Sentral ng Pilipinas (BSP). Only the BSP has weapons against inflation, with interest rates as its most potent weapon.

Last week, the BSP pulled off a big surprise with an unscheduled largest one-time hike in interest rates.

Analysts say the BSP’s big surprise is largely due to a strong US dollar, which is pulling down the peso, now hovering around the 56 level, just a few centavos shy of its all-time low.

Indeed, the value of the US dollar is at its strongest in a generation, devaluing currencies around the world and unsettling the outlook of the global economy, including ours.

Meanwhile, the BSP admits hiking interest rates can slow down the economy, which, as one business journalist puts it, is “just coming up for air” after three years of drowning in pandemic muck.

But BSP — in its balancing act of taming inflation without hurting economic growth

— believes the country still has the stomach to go through higher interest rates.

BSP officials nonetheless candidly admit “nobody knows” when the current inflation might ease up.

The BSP also candidly admits it can’t go at it alone, pointing out, for instance, supply issues hounding local companies are beyond their control. They hope other agencies in government are public spirited enough to do their share in controlling inflation.

We hope so, too. The wolf is now at the door.

“BSP admits hiking interest rates can slow down the economy, which, as one business journalist puts it, is “just coming up for air” after three years of drowning in pandemic muck.

“Oil

prices in fact determine how soon we’ll have tolerable inflation again.