magine inflation keeping President Bongbong Marcos awake at night. This much the President admitted last week in an interview with television journalists at Malacañang. Troubling him are the most pestering of farm products, such as onion and sugar, thanks to traders and hoarders.
But the President must have also been alerted in the last couple of days that the price of garlic has started to shoot up to P400 per kilo and it’s driven by farmers’ decision to shift to onions. Even as the Agriculture department insisted that “we don’t have a shortage of garlic,” in the same breath there was an admission that the Philippines today suffers from a “small supply of local garlic.
It is also about its social consequences, intended or otherwise, and therefore it is at the heart of political governance. In the case of inflation control, the government scored a net disapproval of 11%. Some 42% of the respondents considered government efforts had failed and 31% approved of how inflation was managed. The undecided respondents were less than those who supported public measures against price stability measures.
Based on this, one can expect households and firms to behave in a way that could protect their purchasing power, by demanding more pay, or profit, by selling high. This process could feed into higher inflation expectations. Demand for higher wages and price adjustments could only lead to inflation becoming even more entrenched.
Moreover, the latest inflation footprint for January and its implications on one-year ahead forecast may justify sustained tightening. Two days ago, the BSP announced its projection for January at between 7.5-8.3% “due to a rise in power and water rates, and higher pump prices.” Utilities and energy are new variables in the equation. If this forecast holds, the January 2023 inflation would be the 10straight month that price movements surpassed the 2-4% inflation target of government.