Inflation Targeting In Philippines

Why is Inflation Targeting Favorable as a Monetary Policy of the Philippines?

Inflation and Monetary Policy Let us first defined what an inflation and monetary policy is. For an Economist, an inflation pertains as the rate of change of the mean prices of commodities (such as goods and services) that are generally bought by the consumers. It is usually well- defined as the annual percentage change of the Consumer Price Index or what we commonly called, the CPI. The Consumer Price Index or CPI depicts the average price of a basket of commodities (such as food products, clothing, water, electricity and other goods and services) consumed by an average e consumer family for a given period of time. The price stability is believed to exist if

In this new kind of framework that adopted, the Development Budget and Coordination Committee or DBCC, an interagency body accountable for setting the annual government inflation targets, together with the Bangko Sentral ng Pilipinas sets and make publicly inflation targets based on the Consumer Price Index or CPI two years ahead of time and attempts to navigate the actual inflation rate towards the targeted inflation. The inflation targeting approach gives emphasis on achieving price stability in the economy. Moreover, the Bangko Sentral ng Pilipinas, as the central monetary authority of the Philippines, is the foremost government agency that is responsible in upholding price stability for the reason that it has an exclusive power to influence the circulating amount of money in the economy. The change in the overall demand for goods and services in the economy is mostly affected by the level of money supply. Wherein, too much supply of money circulating in the economy encourages the consumers to increase their demand for goods and services. Thus, the prices drives up if this increased in demand for goods and services is not matched by higher production. On the contrary, too little supply of money to fund the consumption and investments will be likely to reduce the demand of goods and services. A little money supply in the economy will lead to a lower demand for goods and services affecting the prices to fall. Price stability is the core objective of monetary policy for the reason that it supports economic development, allowing the households and businesses to plan ahead of time for their consumption, savings, and investment needs. It also fuels income equality by means of protecting the purchasing power of the underprivileged families who commonly does not have resources or funds