WE shouldn’t worry too much over the Bangko Sentral ng Pilipinas’(BSP) report saying the inflation rate reached 12.2 percent in July. We seem to have exaggerated the seriousness of this development when it described the figure as the highest in 14 years.

Sure, 12.2 percent is high, especially when we recall that our average inflation rate in 2007 was only 2.8 percent, and it was then described as the lowest in 20 years.

What many of us seem not to remember is that Filipinos are used to seeing far higher inflation rates. That’s why we are not shocked by the July inflation rate.

In the 1970s our average inflation rate was 12.4 percent. In the decade of the ’80s it was 14.82 percent; and in the period 1992-1996 the average was 8.2 percent. The latter may also be our average inflation rate for 2008.

The highest inflation rate recorded in the Philippines since 1958 was 50 percent. It’s still the highest in our postwar history. The lowest was posted in 1959 when it turned negative, at negative 0.5 percent. In the past half-century we have had years when inflation average was close to 1 percent, but we also have had double-digit rates in about half of that period.

The Bangko Sentral says the 12.2 percent might not be the highest yet for this year, and that inflation may reach the peak this month before starting to come down. That’s understandable. As the primary agency that tries to control inflation as a primary tool for maintaining price stability, which, in turn, is aimed at promoting economic growth, the BSP and its policymaking arm, the Monetary Board, has to take a conservative stance.

Experts, you know, generally depend heavily on statistics to come out with conclusions, as well as make projections like how the inflation rate would be this month, this year or next year. Such projections are indeed important for the monetary authorities and the government’s economic managers, and businessmen take them into consideration when they prepare investment plans and make business decisions.

I also look at what the experts say. But, at the same time, I listen to my own gut feel, and my gut tells me that we may have hit the peak with respect to inflation, and we may see it coming down as early as August. The first reason, which cannot be translated directly into statistics, is the waning of the panic factor, which triggered excessive speculation and sent prices zooming up during the first three months of the year.

That’s what prompted the government to immediately place huge orders for imported rice when our farmers were starting to harvest their crops. And that’s the reason, too, why traders hoarded rice, and that forced our people to line up under the sun and rain to buy the prime commodity. Even some supermarkets in California had to limit sales of rice because many overseas Filipinos were sending rice to their families and relatives here. For a Filipino, not having rice on the table comes close to the end of the world.

So the panic is gone. Prices are still high compared with last year’s, but there is no more speculation. We now see commercial rice being sold between P30 and P40 a kilo after reaching more than P45 in the first quarter. Fuel prices have gone down substantially as worries about global oil prices reaching as high as $200 a barrel disappear.

I’m sure the inflation rate will easily go down and we will see further price reductions in no time, and will come about, if the government continues to implement present policies.

The conservative stance of the Bangko Sentral with respect to limiting the increase in interest rates is a good balancing act. The recent increases in its policy rates have resulted in a slightly upward adjustment in bank lending rates, but are not expected to restrict economic activities as well as consumer spending significantly.

Revenue collections continue to improve, and government finances are strong. This is an important factor for maintaining a stable image before the international community, particularly creditors and rating agencies. It allows us to maintain access to financing at friendly terms.

The exchange rate is doing P44 to P45, down from P41 at the beginning of the year. There’s a downside, but I believe the upside is better because it will help our exporters to recover, and the families of overseas Filipinos to regain “lost” income.

Going back to the psychological element, as long as businessmen see the inflation rate coming down, even if it is slow, it gives them a certain level of comfort that we have seen the worst, and that the situation can only be better. It will give a good impression that inflation is under control.

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