Keeping inflation in check

Published September 10, 2018, 12:05 AM

by Charissa Luci-Atienza & Bernie Cahiles-Magkilat



Ignacio R. Bunye
Ignacio R. Bunye

While waiting for my turn during one of my regular visits to my physician’s clinic, I met another early bird, a  friendly recently-retired school teacher who came all the way from Batangas.

“Hindi ba kayo yung  napapanood ko  sa TV dati,” he greeted me. I replied that was years ago. I had since transferred to the Bangko Sentral  from which I had retired.

“Ah, BSP, e di kayo pala ang nag-iimprenta ng pera natin.”

I replied “Yes.” But more than just printing money,  I explained that the Bangko Sentral  ensures that the money it prints maintains its  value.

The BSP makes sure that every Juan and Maria’s hard-earned money  (like the teacher’s pension)  continues to retain as much of  its purchasing power as possible.

I explained that the Bangko Sentral does this by endeavoring to keep the inflation rate low and stable.

I noticed that he knitted his eyebrows so I proceeded more slowly and tried to explain inflation in simpler language.

The retired teacher and I are both members of media (me diabetes), and apparently consult the same doctor,  so I used terms which we commonly hear in the clinic.

Look at inflation like it is blood sugar, I explained to him.

A certain level of blood sugar is good for us. But a sugar level that is too high (hyperglycemia) or too low (hypoglycemia) is bad for us. In fact, either extreme condition can actually kill!

He nodded so I continued.

To maintain a healthy level of blood sugar, Dr. Thelma Crisostomo prescribes medication, adequate exercise, and proper diet.

She periodically adjusts our medication (either increase or decrease or maintain the type and dosage of medicines), depending on how our sugar level behaves.

Similarly, all the goods and services that we commonly buy and use have prices. The rate at which this price increases over time is called inflation. In analogous terms, inflation represents the level of sugar in our blood.

Too high inflation (hyper inflation) would make our money practically useless. Too low inflation would discourage manufacturers from manufacturing goods and our economy would slow down.

BSP Governor Nestor Espenilla, Jr.   and his team at the Bangko Sentral are just like Dr. Crisostomo, I said.  It is their job to ensure that the economy stays healthy by keeping the inflation  rate low and stable.

They also have the equivalent of a   medical kit. From this kit, the BSP team prescribes  “medicines” singly or in combination to move inflation to within  a target range.

To arrive at the proper prescription, which the BSP issues every six weeks,  the BSP team regularly analyzes and evaluates a mountain of  economic data. They look at these data like our doctor would read our laboratory results.

And in like manner, the BSP would write its prescription depending  on its reading of the economic environment.

The effect of these medicines is not immediate but is felt only after some time.

Just then, my name was called by the clinic staff and I had to excuse myself.

“Ay sayang. Ang dami ko pa naman sanang gustong itanong.”

Have we had a little more time, I would have told him about the different types of inflation according to  what caused them.

I would have told him that one type  of inflation which is caused by too much demand for goods  is something which could  be controlled by BSP-prescribed medicines.

But another time of inflation such as one caused by abrupt rise in the cost of a commodity, like oil,  needs to be referred to  another specialist for co-management.

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