The domestic inflation rate in the Philippines is predicted to range from 5.7 percent to 6.5 percent inflation in July 2022 as a result of sustained increases in oil prices and their effects on power prices.
The (BSP) Bangko Sentral ng Pilipinas mentioned that "increased prices of major food products and peso depreciation" are also among the inflationary pressures this month.
However, the cheaper cost of fish and liquified petroleum gas (LPG) is thought to offset these benefits, it stated.
The BSP's mandate of price and financial stability continued, "Looking ahead, the BSP will continue to closely watch developing price changes to enable early intervention to halt the appearance of future second-round impacts."
The government's target range of 2-4 percent was exceeded for the second consecutive month in May, and the forecast inflation rate for this month is greater than the 5.4 percent recorded in May last year.
Inflation mechanisms, business expectations, and monetary policy
The effects of inflation on economies, both mature and emerging, inflation has been out of control for some years. The experience of emerging market economies (EMEs) has been uneven, in contrast to advanced economies (AEs), where inflation has typically been below target. While inflation has been above target in numerous Latin American economies, as well as in Russia, South Africa, and Turkey, it has been below target in a number of EMEs in Asia and central and eastern Europe.
In a business expectations survey conducted by the Banko Sentral ng Pilipinas, business sentiment is less optimistic in Q1 2022 but more buoyant for Q2 2022 and the next 12 months. The recurrence of cases from the novel Omicron variety and the subsequent reimposition of tougher quarantine measures in many locations at the beginning of the year were significant factors in the less optimistic outlook. Other elements that decreased business confidence in Q1 2022 included the following: (a) rising costs for fuel and raw materials; (b) declining sales and demand for some goods and services (such as cars, education services, and construction); (c) the weakening peso; and (d) the negative effects of natural disasters, such as Typhoon Odette (in December 2021).
However, the higher significance of inflation expectations may not always be a good thing. Should price-setters lose faith in the central bank's competence or willingness to maintain price stability, it may result in sudden swings in inflation (and presumably output). In such a scenario, a flat Phillips curve and little pass-through of the exchange rate may lessen the effectiveness of monetary policy in stabilizing the economy. For example, if inflation expectations increased, a more drastic decline in economic activity would be required to keep inflation under control.
How to weather out inflation in the Philippines?
When it comes to inflation, there are things you need to be doing to keep you sustained in the next 12 months to weather out the effects of inflation. Here are some practical tips for doing during inflation.
Get Rid of Debt
Many people use credit cards or other forms of debt to fill the gap between their income and spending when money is tight. This worsens the situation because there are now more due commitments each month.
Cutting debt as much as possible is the simplest way to get out of this issue. When you do this, more of your money will go toward interest rather than merely covering necessary bills like rent and food, and you'll be surprised at how rapidly your earnings increase.
Cut back on non-essential items.
It's probably reasonable to bear this cost if the price of a necessary good, like groceries, rises by 5%. However, there's no reason you should feel compelled to purchase it if the price of a luxury good like steak or ice cream also increases by 5% at the same time. Why? Considering that these prices have increased and are no longer necessary.
To counteract the consequences of inflation, the idea is to spend less on non-essentials. This can entail forgoing the occasional night out with friends if you're single to save money. If you have children, it can entail modifying your home to meet the demands of your entire family. The critical point is that you may keep your savings account intact by cutting back on your expenditures without giving up too much comfort.
Invest in income-generating asset
Saving money for retirement is less of a priority if you work a full-time job because you still have time.
But let's say you're planning to retire soon or want to be financially independent before you turn 40. If so, it makes sense to invest in assets that can generate income, such as rental properties or index funds, so that that money can work harder for you rather than against you.
If you have a big home, you might wish to downsize and rent it out instead to make money from rentals. If you have enough money saved up for a down payment on a piece of real estates (real estate prices might increase during inflation) like a piece of land, a house and lot, or a condo-investing is also a good choice.
Invest in stocks, mutual funds, and ETFs
Your money will increase even as inflation rises if you invest in stocks, mutual funds, exchange-traded funds (ETFs), and other products that provide income for you over time.
Additionally, it implies that after the impacts of inflation fade and the economy are once more stable, you will be able to recover all or the majority of your costs while still turning a profit.
There you have it. To make your finances inflation-proof and live within your means, you don't need to be an expert in finance or economics. Nevertheless, it's important to stay informed about the events in the world around you so that you won't pass up chances for development, success, and security.
One of the most sneaky problems with our finances is inflation. It can progressively erode your savings if you're not careful about how much money leaves your account vs. how much money comes in. Planning and acting now, before it's too late, is the greatest way to combat inflation.
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