LAST Thursday, the Bangko Sentral ng Pilipinas (BSP) announced that the Monetary Board (MB) will increase the interest rate on the BSP’s overnight reverse repurchase facility by 75 basis points to 5.0 percent effective Friday, November 18.

Interest rates will also be set to 4.5 percent and 5.5 percent for overnight deposit and lending facilities, the BSP said.

The MB cited the recent 7.7 percent increase in inflation last October as an indication of a sharper move of higher food and energy costs. Meanwhile, the demand-side pressures on inflation were one of the primary reasons for the decision to increase the policy interest rate once again.

The BSP’s latest baseline predictions imply a steeper inflation path across the policy horizon, with average inflation breaking the 2-4 percent target range in 2022 and 2023. In addition, the 2024 prediction is up to 3.1 percent.

Monetary policy and interest rates are two of the strategies that BSP employs to maintain price stability. This is accomplished by limiting the amount of money in circulation and making it more expensive to borrow money.

But how will this affect ordinary consumers?

Impact on small business

Princess Ison, a small-time business owner, is complaining about the recent announcement of the country’s central bank. 

“Bilang small-time business owner, sobrang hirap nito for us dahil considering na mataas na ang prices dahil sa inflation, tataas pa dahil sa interest rate ng BSP, talagang maaapektuhan yung operations namin,” Ison said during a phone interview.

She also mentioned that she cut down the labor force in order to sustain the business. She has now been manning the business for months with her partner to diminish the cost of paying staff. 

“For now, ang magagawa namin is babaan ang quantity ng supplies na bibilhin namin, that also means bababa ang kita rin namin dahil dito dahil konti lang ang mabebenta namin,” she said.

Low salary, high-interest rates

Meanwhile, Cindy De Guzman, a public school teacher in Bulacan, whines about the low salary of public educators in the country. And now teachers will bear the brunt of interest rates on their loans.

“Hindi na nga sapat ang sahod ng mga guro, magtataas pa ng interest sa loans namin,” De Guzman said in a mail interview.

“Ang dami kong loans, magkano na lang matitira sa sahod ko kapag naisakatuparan yan? Tatlo ang anak ko at lahat ay kasalukuyang nag aaral, kung may pagkakataon lang ako nag-abroad na lang ako,” she said.

With the deteriorating economic situation of the Philippines due to the onslaught of the global pandemic and typhoons, will the increase of policy and interest rates address the collapsing financial state of the country, considering the impact of this decision on ordinary citizens?

The answer is already evident.

But the BSP assured the public that it “will continue to take all necessary action to bring  inflation back within the target band over the medium term, in keeping with its primary mandate to sustain price and financial stability.”

For now, Judith (due date)  will remain an unwanted guest  for some – and a burden for many.

Photo Credit: Bangko Sentral ng Pilipinas