Press Releases

Salceda calls on economic team to “solve ‘real economy’ constraints, help the poor” amid calls for bigger rate hikes by the Bangko Sentral ng Pilipinas

July 2nd, 2022

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) has called on the Marcos economic team to focus on “solving constraints in the real economy” and to “shield the poor from largely external factors of inflation” amid calls for faster interest rate hikes by the Bangko Sentral ng Pilipinas (BSP) to address fears of spiraling inflation.

“The decision of the Central Bank on whether to increase rate hikes should be predicated on just two things: whether the country’s inflation is caused by excess liquidity in the Philippine markets, and whether the rate hike relates to the causes of inflation in the Philippines. For now, the answer is largely no, so we should not self-inflict a pain that is, in all likelihood, going to be futile for addressing price concerns,” Salceda said.

Salceda adds that “year-on-year, the Q1 broad money only expanded by 7.7 percent, while GDP expanded by 8.3 percent. That means the real economy, for now at least, is still growing faster than our money printing. Money supply then, isn’t the problem with prices, as we can clearly see with the main factors: transport, fuel and energy, and food.”

“Between inflation with growth and inflation with slower growth due to an untimely or unnecessary rate hike, I would prefer inflation with growth,” Salceda said.

“So, I would discourage those who call for more aggressive BSP action on policy rates. I would instead call for just enough policy rate adjustments to expand our room for action should inflation momentum accelerate further. But for now, inflation is mostly not the financial sector’s fault. So financial sector action will hardly make a dent.”

“The key is still to produce enough food, find cheaper energy, and solve transport bottlenecks. No BSP action will be a good substitute for these three priorities.”

Salceda called on the economic managers to instead “focus on the constraints in the real economy, and to shield the poor from the worst effects of inflation.”

“During my time as an investment banker, I sparred with some officials of the BSP on the central bank’s actions to support the Peso during the years that immediately presaged the Asian Financial Crisis. Monetary policy action should relate directly to the cause of the economic incident being addressed. Otherwise, it will be costly and almost certainly futile.”

Salceda also said that he supports a Bayan Bangon Muli package that is more “inflation-busting” than focused on more spending.

“I am filing a version that is more focused on inflation-busting powers of the President and programs to remove supply constraints. That is the need of the time.”

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