Higher-than-expected wage hikes to prompt rate adjustment

Published by rudy Date posted on April 1, 2011

MINIMUM WAGE hikes exceeding P25 per day could prompt monetary authorities to raise policy rates, a Bangko Sentral ng Pilipinas (BSP) official said on Thursday.

“A P25 [wage] increase has been factored in already in the recent rate increase. If it’s higher than that then we have to run reviews,” central bank Deputy Governor Diwa C. Guinigundo told reporters late on Thursday.

The central bank last week raised interest rates — its first adjustment since July 2009 — by 25 basis points, warning of mounting inflationary pressures.

The Trade Union Congress of the Philippines last month filed a petition for a P75 across-the-board increase in Metro Manila and earlier this week the Trade secretary said pay adjustments were necessary given rising prices.

On Thursday, President Benigno S. C. Aquino III was quoted as saying that wage hikes are allowed if inflation hits 5%. The day before, BSP Governor Amando M. Tetangco, Jr. said inflation — at 4.3% in February — could top 5% in the second and third quarters.

The view that wage have to be adjusted is “something to be clarified” Mr. Guinigundo said.

“The president noted that wage hikes will be allowed if inflation will hit 5%. But is this a moving average or just a monthly figure,” he said.

The Monetary Board, Mr. Guinigundo added, has been vigilant in keeping prices stable. “This is precisely the point why the MB raised policy rates,” he said. –Businessworld

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