CAGAYAN DE ORO CITY (PIA)--The Bangko Sentral ng Pilipinas (BSP) Mindanao regional office urged consumers to spend modestly on expenses and not to borrow money in order to spend, as the forecast of inflation is still going up until the third or fourth quarter of 2023.

"Kung wala ta’y kwarta karon, dili ta mangutang in order to spend. Pero kung naa ta’y kwarta, we have to be modest with our expenses nga dili lang pud muingon nga mag-splurge ta sa atong expenses," said Ramonetto S. Gervacio, bank officer II, Regional Economic Affairs Staff (REAS), BSP Mindanao Regional Office during the Talakayan sa PIA, media forum at SM CDO Downtown Premier.

(If we don’t have money now, we should not borrow in order to spend. But if we have money, we have to be modest with our expenses, not to the point of splurging with them)

The projection of the BSP for inflation is from 7.4 to 8.4% in November 2022, and actual inflation is 8.2%, but the target is from 2% to 4%, clarified Gervacio.

He further explained that inflation will still continue until such a time in the third or fourth quarter of 2023 that it will go back to BSP’s target.

"Dili man gud nato diretso mapaubos ang presyo tungod kay ang inflation is a combination of many other factors nga external sa Philippines and also internal sa atoa dinhi," said Gervacio.

(We cannot immediately lower the prices because inflation is a combination of many other factors that are external to the Philippines and also internal here)

Inflation is the rate at which prices for goods and services rise.

According to Gervacio, there are two types of inflation: demand-driven inflation, which occurs when demand exceeds supply, and because "we have a lot of money," we buy more and spend more.

Meanwhile, the second type is supply-driven inflation, which occurs when there is a scarcity of certain goods on the market, such as sugar. "We have a problem with the supply of fertilizer and farm inputs because these are lacking, which is why prices have gone up," he explained.

Inflation is not all bad because there is a specific target where inflation is just stable, which is from 2% to 4%.

Prices for goods cannot be cheap or stay the same forever; therefore, incentives must be created for businesses, including producers, he added.

A low inflation rate is undesirable, and a high inflation rate can erode the purchasing power of the peso.

The BSP's primary function is price stability.

Gervacio shared that, starting in August last year, BSP implemented an interest hike.

"Atong gipatas-an atong interest rate, ang effect man gud anang interest rate, duha. Una, it affects money supply locally, and also ma-temper nato ang effect sa strong dollar," he said.

(We raised our interest rate; this has two effects: it affects the local money supply, and it dampens the impact of the strong dollar)

He explained that one of the key reasons why "we bleed dollars" is that the federal reserves in the United States have increased their interest rate, so those who have dollar holdings in the Philippines will park them in the US.

The BSP is trying to match the interest rates of the federal reserve so that the market will be more attractive to those with dollar holdings, he said. (JMOR/PIA-10)