The Bangko Sentral ng Pilipinas (BSP) has increased its key interest rate from five percent to 5.5 percent to control inflation and slow down the increase in prices of basic goods and services. But it will take more than this intervention to protect the Filipinos’ purchasing power.
The Monetary Board, the central bank’s policymaking body, sees the interest rate hike as a necessary step, as inflation could remain high next year because of rising fuel prices, transport fares and the potential effects of El Niño. It expects the inflation rate to return to three percent only in 2028.
According to a BSP statement, the decision would raise interest rates on overnight deposit and lending facilities to five percent and six percent, respectively. This means banks may eventually, not right away, offer better rates on savings accounts and time deposits. However, interest rates on new housing, car, personal and business loans may also increase. Overall, higher financing costs could discourage businesses from expanding or hiring more people, while consumers may have to cut back on spending.
While all Filipinos are affected by inflation, one sector particularly vulnerable is retirees and senior citizens.
Most retirees live on fixed incomes. They cannot ask for raises in their pensions whenever prices go up. Their savings and investments, if they have any, get slowly eaten away by the higher costs of goods, medicine and other necessities. Those who depend on additional support from their children may not get the same financial help as their families struggle with rising expenses.
What can older Filipinos do? For one, prioritize expenses.
Medicine is one expense that many cannot do away with or lessen. Maintenance medicine is essential to their health or, in some cases, their survival. Keeping themselves as healthy as possible can also help avoid additional medical expenses.
Retirees should have ideally paid off their loans before retirement. But those still paying for a house, car, or other loans should check whether their loan interest rates are fixed or variable and if the contract allows for repricing.
They should also make the most out of government benefits. These include Philippine Health Insurance Corp. (Philhealth) coverage, Philhealth’s Yakap program and the 20 percent seniors’ discount.
Older Filipinos cannot wait indefinitely for inflation to slow. They do not know how much time they have left and every month prices rise without a corresponding increase in their pensions means another reduction in what they can afford.
It takes more than a BSP interest rate increase to control inflation. The BSP can discourage borrowing and spending, but it cannot produce more rice or bring down global fuel prices. Government agencies must also address food supply and distribution problems, monitor prices regularly and intensively and act against profiteering and other illegal practices.
For retirees and older Filipinos, controlling inflation is solely about making their pensions and savings last for the rest of their lives.