Why Should You Be Concerned About Inflation And How To Manage It?

​Rising inflation has made people feel anxious and overwhelmed. Are you prepared for inflation?

What is Inflation?

​The average price change of goods and services that customers normally buy is referred to as inflation.  Price stability is a condition that exists when inflation is minimal and stable. 

The annual percentage change in the Consumer Price Index (CPI) is the standard definition of inflation.  The CPI shows the average cost of a typical basket of goods and services that a typical Filipino family would have purchased over a specific time period. Numerous consumer goods, including food, clothing, water, and energy, are included in this standard basket, and the price changes of these goods are tracked in order to gauge inflation.

What is the role of PSA in relation to inflation?

The Philippine Statistics Authority (PSA), which is situated here in the Philippines, determines and publishes the monthly CPI and the rate of inflation based on a monthly nationwide survey of prices for a predetermined basket of commodities. Through surveys that are done on a regular basis, the PSA also establishes the CPI basket's composition.

The Philippine Statistics Authority (PSA) was established in accordance with RA 10625, 2013, also known as the Philippine Statistical Act of 2013, and is in charge of all national censuses and surveys, sectoral statistics, the consolidation of a few administrative recording systems, and the compilation of the national accounts.  The National Statistical Coordination Board (NSCB), the Bureau of Agricultural Statistics (BAS), the Bureau of Labor and Employment Statistics (BLES), and all other significant government statistical agencies will be included in the PSA as of December 29, 2013.

​What about the BSP? What role does it have in terms of inflation?

​The Bangko Sentral ng Pilipinas (BSP), which conducts monetary policy, chiefly by changing its policy interest rate, manages inflation. Changes in the interest rate for the overnight reverse repurchase (RRP) facility of the BSP, the main tool for monetary policy, generally result in matching changes in market interest rates, which affect consumer and business demand for products and services. The overall supply of products and services and this jointly affect the level of prices.

​What causes inflation?

​Supply, demand, and government spending are the main causes of inflation in every economy. Prices rise as a result of demand-pull inflation, which occurs when an economy's total inflation rate rises faster than the rate at which demand is growing for goods. The same is true when government expenditure exceeds economic growth, a situation known as cost-push inflation. Cost-push inflation often occurs when governments invest money in projects or programs to boost their economies but do not have enough revenue from taxes or other sources to cover them entirely. Similar to this, prices rise when there is an excessive amount of money in circulation, sometimes referred to as monetary oversupply, because there is more competition among buyers for scarce resources.

​What is the impact of inflation?

​Filipino families' budgets can be significantly impacted by inflation, a fundamental economic issue. Inflation can be defined as a steady rise in the average price of goods and services throughout an economy. As a result, Filipino families might find themselves spending more on basic necessities, which could strain their budgets.
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​What are the strategies to help you cope with inflation?

​Families must learn how to effectively budget for inflation when costs rise, but this can be difficult, particularly for those who are already living paycheck to paycheck. Here are some suggestions for coping with inflation if you're concerned about how it may affect you.

Pay attention to your spending

Pay attention to your spending, especially given the state of the economy right now. You can find areas where you can make savings by keeping track of your spending for even a short while.

​Learn to invest

​Counteract inflation by investing. Your money should also grow. There are lots of financial instruments that will help you cope with inflation, such as Stocks, Mutual Funds, UITFs, REITs, and Exchange-Traded funds (ETFs). But keep in mind that your money needs time to benefit from the power of compounding interest. Invest for the long term!

Have an emergency fund

The rule of thumb is to have at least 3 to 6 months (better, up to 1 year) of income to help cope with emergencies and unforeseen changes. An emergency fund is not an investment; rather, it serves as protection for you and your family in case of an emergency.