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Higher interest rates a recipe for more misery

05:02 AM July 09, 2018

The plan by the Bangko Sentral ng Pilipinas (BSP) to further increase interest rates to halt inflation is a recipe for more misery among Filipinos.

Does this mean ordinary families will cut their spending for basic necessities?

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No. They will continue defraying for essential needs like food, education, transport, monthly bills, etc.

Providers of basic goods and services, meanwhile, will likely increase their prices more to compensate for their diminishing operating capital, discouraged as they would be to borrow from banks due to higher interest rates. Thus, ordinary consumers will be at the losing end.

In fact, the last two increases in interest rates did not stop the rise in inflation.

Yet the BSP is planning to raise it again, alarmed by the 5.2-percent inflation (the highest in five years) which has already breached the 4.2-percent level set by the Duterte administration.

This harebrained policy is akin to taking the same medicine again when it only makes the patient worse.

The correct solution is for the government to take direct action by suspending the TRAIN Law, instead of wistfully thinking the market will right itself in the long run.

By then, many consumers will be dead.

DON VILLAR, taniman73@yahoo.com

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TAGS: bangko sentral ng pilipinas, BSP, Don Villar, inflation, Inquirer letters, Interest Rates, tax reforms, train
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