Attention Marcos economic team: Salceda's solution to the inflation problem

Published July 2, 2022, 3:30 PM

by Ellson Quismorio

Economist-congressman Joey Salceda of Albay’s 2nd district believes he has a better way of tackling the inflation problem.

Albay 2nd district Rep. Joey Salceda (Facebook)

This, as the solon prodded the economic team of newly-inaugurated President Ferdinand “Bongbong” Marcos Jr. 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.

“Year-on-year, the Q1 (first quarter) broad money only expanded by 7.7 percent, while GDP (gross domestic product) expanded by 8.3 percent. That means the real economy, for now at least, is still growing faster than our money printing,” the Bicolano noted.

“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,” said the number-crunching solon.

“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,” he explained.

Salceda, who served as the House Committee on Ways and Means chairman during the 18th Congress, insisted that producing ample food, finding cheaper energy, and solving transport bottlenecks remain key.

“No BSP action will be a good substitute for these three priorities,” he said.

“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,” he said.

Salceda also said that he supports a Bayan Bangon Muli or BBM 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,” he said.