BUSINESS CORRIDOR

She leads a relatively comfortable life. But, then she complains about the continuous rise in the pump prices of petroleum products. “It’s almost doubled. We’re dipping further down into our pockets,” Rowena Ruaro mused.

We can all empathize. The cost of living has dramatically gone up as the ugly head of inflation, a dreaded consequence of the now nearly four month-old Russian invasion of Ukraine, emerged.

Reality and fact check indicate that the rise in the prices of basic commodities will continue that may send the global economy into a slowdown, hopefully not a tailspin.  

In my verbal exchanges with my favorite market analyst, it was as plain as vanilla that inflation “in more dispiriting reality, is far from peaking, and seems to be gaining altitude.” Graphically, higher inflation could force us to belt tightening and “would prevent us from taking that second cup of rice.”

Monetary authorities, both here and out there like the US Federal Reserve, are ready to stamp out inflation’s ugly by increasing interest rates. Fed tightening and the anticipated similar move from the Bangko Sentral ng Pilipinas (BSP) sent jitters to the financial/equities market.

Though, BSP has yet to implement an increase in its key overnight interest rates, which the incoming BSP Governor, currently member of the monetary board, Felipe Medalla, intimated that the tightening is not one-time but could be on a gradual mode depending on inflation performance.

Though in the US, it was a one-time big time hike. Having registered the highest and fastest ever inflation in four decades at 8.6 percent for the month of June, the Federal Reserves jacked up by 0.75 basis points its short-term benchmark interest rate.

Locally, the anticipation is for the overnight interest rate to rise by 25 basis points. But there are signs that the monetary authorities may consider a 50 basis points increase should inflation hit or go beyond six percent.

Ill-timed, just when business is slowly recovering from the slug due to virus, the cost of doing business is going up. Thus, quick reminder to those in need of funding that now is the time to borrow as the cost is a bit affordable.

This jittery condition, coupled with the ambiguity on how the incoming government will handle the fragile state of the domestic economy sent shivers, spooking the equities market, bringing it to bear territory.

The Philippine Stock Exchange index as I write this slumped by 63.03 points or 0.97% to close at 6,467.01 while the all shares index went down 37.00 points or 1.05% to 3,474.93.

Some ascribed it as a “symbolic psychological hurdle for investors” but the condition is bursting at the edges. The issue of food security, power and fuel, job creation, plus supply bottleneck comes to fore.

It manifests in the market’s nervousness. Such suggests the fear of the unknown. This is the challenge that the economic managers of the incoming government would have to brace up.

Honestly, though, it may not seem half-that-bad because the domestic economy is not on the edge because if you go around, the activities are bursting at the seams. This apprehension could be a temporary blip.

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