MANILA, Philippines — President Ferdinand Marcos Jr. said Tuesday he “disagrees” with state statisticians’ report showing inflation sizzling to a three-year high in June, all while admitting that the government might miss its inflation target this year.
"I think that I will have to disagree with that number,” Marcos said at a press conference after his first Cabinet meeting in Malacañan.
“We're not that high,” he continued, adding that the Philippines is not alone in dealing with the inflation problem.
The president was referring to the 6.1% inflation reading in June that the Philippine Statistics Authority reported earlier in the day. It was the fastest rate that prices grew since 2018, the year inflation shot up to near-decade highs amid a rice shortage and currency slump at the time.
Inflation and the purchasing power of the peso is measured using the consumer price index, which the PSA computes on a monthly basis. Reacting to the president’s remarks, National Statistician Claire Dennis Mapa, who told a Tuesday morning press conference that inflation will likely move higher in the coming months, said the PSA “stands by its report”.
As it is, analysts believe the Philippines has yet to see the peak of inflation as oil and food prices remain stubbornly high. While he disagrees with the data from state statisticians, Marcos admitted that the government will not hit its 2-4% inflation target for this year.
“We may cross that threshold,” he said. PSA data showed inflation averaged 4.4% in the first half of the year.
Imported inflation and rate hikes
In the same news conference, Marcos then lectured about the role of monetary policy in taming inflation, saying that adjustments to the Bangko Sentral ng Pilipinas’ key rate will not focus so much on stemming the peso’s slump.
READ: BSP sustains dovish attack on inflation, fires off second rate hike
But at the same time, the president acknowledged that the Philippines is grappling with imported inflation, which is being fanned by the peso’s weakness. In the past weeks, the local currency has been trading at the P55-per-dollar level — a territory that was not seen in nearly 17 years.
"Our monetary policy is essentially to use the interest rate to hold, to control the inflation rate. We’re not looking to specifically at exchange rates now," he said.
The BSP said in a briefing a week before Marcos' inauguration that the local unit is facing off against a strong dollar trend, which has also suppressed other regional currencies. Many economists surmised then that BSP could have been more aggressive in tightening policy rates, but the Monetary Board maintained its dovish posture amid fears of derailing the Philippine economy's recovery.
For Leonardo Lanzona, an economist at Ateneo De Manila University, the power of BSP’s tools has limits, adding that the government should also help in the inflation fight.
"This (Marcos’ statement) presumes that the domestic monetary policy is enough to control inflation. But the inflation is imported or caused by supply side, as opposed to monetary factors and affects mostly the food prices, hence changing the relative as opposed to aggregate prices,” Lanzona said.
"Besides, the monetary policies have been pushing for increased aggregate demand because of its policy of lowering interest rates, which partly explains for the weak peso. If the goal is to control inflation through monetary policy (which can be counterproductive), then interest rates should been increased," he added.
"In summary, the President does not seem to know how international trade works. Money is not all that matters,” he continued.
Separately, Nicholas Antonio Mapa, senior economist of ING Bank in Manila, believes the peso’s weakness bears watching.
"BSP main policy tool is not the policy rate and it does not target an exchange rate level. However, a weaker PHP may have fanned additional price pressures via imported inflation," Mapa said in a Viber message.