BSP study: Filipino households boost essential goods spending amid high inflation expectations

A discussion paper by Bangko Sentral ng Pilipinas (BSP) researchers suggests that Filipino households tend to increase planned consumption on essential goods if they expect inflation to accelerate.

The BSP's Consumer Expectations Survey indicates that household inflation expectations are expected to remain above the 2-4% target range in the near term, with more households anticipating elevated prices for key commodities like rice even when actual inflation is within target.

Researchers found that supply-side shocks such as currency depreciation and international oil price changes significantly impact household consumption and inflation expectations, while monetary policy adjustments have a lesser effect.

The study highlights the importance of clear communication from central banks to manage public inflation expectations effectively and prevent second-round effects on prices and economic activity.

Filipinos also rely heavily on remittances from abroad, with nearly a third of households depending on them for income augmentation, making exchange rate fluctuations crucial in shaping consumption patterns and inflation outlooks.