Into the Woods, TINA – Manila Bulletin

The sharp rise in petroleum product prices on Tuesday virtually offset and even exceeded the amount motorists saved from the downward trend that lasted nearly a month.

And whether artificial or real, the shortage of most basic additives – sugar and salt as well as soaring prices for onions – makes it easy to assume that inflation and interest rates are on the rise. .

Returning to the urban jungle after a long weekend in Tagaytay, I imagined performing inflationary control on the province’s most basic commodity – the pineapple.

From the previous three percent pesos, the fruit, rich in fiber and vitamin C, sold for 80 pesos apiece and with a little haggling the tag price was reduced to 200 pesos for three. That’s a 100% increase.

Japanese maize, which costs three for 50 pesos, now costs four percent pesos, while a kilo of ladyfinger papaya has risen from 10 pesos to 50 pesos a kilo. And the all time favorite ‘bangus’ (milk fish) the price has gone from an average of P20 to around P180 per kilo depending on size.

We have yet to see the full impact of rising oil prices with the transport sector seeking a commensurate fare increase to cover the current cost of fuel.

So, instead of getting out of the woods, we are going deeper into the woods as there is a high likelihood that the Bangko Sentral ng Pilipinas (BSP) will continue the course of monetary tightening to contain inflation and prevent it from spiraling out of control.

The talks circulating in the business and banking corridors are a bit disturbing, especially for business planners. All things considered, including market developments overseas, the emerging consensus is that inflation could continue to rise and could eventually exceed this year’s revised average assumption of between 4.5% and 5.5% .

As BSP holds the reins more firmly, its key overnight interest rates could reach 4.75% by the end of the year, a percentage point higher than currently.

Recall that the Governor of the BSP, Felipe M. Medalla, in one of his interviews, hinted that the BSP will go hand in hand with the actions of the US Federal Reserve, which, based on the latest assessment, could cause interest rates to rise further.

It could also mean that the cost of doing business can become a little restrictive, both for micro-small and medium-sized enterprises and for large industries that plan to tap into loanable funds to partially finance their operations.

The national government could also be penalized by the rise in interest rates since its funding mix is ​​more focused on domestic sources, at 75%, or a total of 1,910 billion pesos, which will come from the issuance of bonds. Treasury and fixed rate securities. Treasury bill rates.

Another evolving scenario is the appearance of TINA. TINA is an acronym for “there is no alternative”, which investors use to “justify poor stock performance”.

Financial analysts predict that the relatively sluggish performance of the equity market will prevail, in an opposite trajectory to the persistent rise in inflation and interest rates. The outlook for the local stock market is bearish and could break the benchmark which could breach the 6,000 barrier with the possibility of another round of bullishness from the US Fed.

And regardless of Governor Philip’s assurance that BSP is prepared to take the necessary steps to “anchor inflation expectations” and bring them down to 2-4%, this may be quite difficult for now as the offshore situation, dictates political measures.

Talk to me at [email protected]

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