Manila says higher wage hike may pressure CPI

Published by rudy Date posted on May 3, 2011

Manila May 3 (Reuters) – A wage hike above the Philippine central bank’s assumed increase for this year may put more pressure on consumer prices, but inflation is likely to be more moderate next year, Governor Amando Tetangco said on Tuesday.

The central bank assumed a wage hike of 25 pesos ($0.58) to the existing daily minimum wage of 404 pesos in Manila when it raised rates by 25 basis points at its last policy meeting in March. That rate hike was the first since the global financial crisis.

If the actual increase will be more than 25 pesos, “that will have inflationary implications over and above what we have assumed. Now, we will have to assess the impact of that,” Tetangco told reporters.

Labour groups are seeking a salary increase of 75 pesos in the daily wage of private sector workers in the capital.

The wage board in the capital started its public hearings on the salary hike petition on Monday and is expected to be ready with a final decision on the increase next week after President Benigno Aquino ordered all wage boards to fast-track their decision process. [ID:nL3E7G1013]


Tetangco said a new inflation forecast for 2011 would be announced on Thursday. Policymakers previously said average inflation this year could come near the upper end of the government’s target range of 3 to 5 percent, which is also the target for 2012.

Tetangco said inflation next year was still seen falling below the midpoint of the central bank’s target range.

Monetary authorities are widely expected to deliver another quarter-percentage-point rate hike at its rates meeting on Thursday, hours after official April inflation data is released.

Analysts expect annual inflation to have risen to 4.4 percent in April, a one-year high, and near the top end of the central bank’s forecast of 3.7 to 4.7 percent.

Fighting inflation has been at the centre of central bankers agenda around the world, with some responding by raising rates aggressively. The Philippines was the last major economy in Asia to hike its policy rates in March after the global financial crisis.

Policymakers have said the inflation rate could exceed 5 percent in the coming months before tapering off, and that they were ready to take further action to tame price pressures.

($1 = 42.8 Philippine Pesos) (Writing by Rosemarie Francisco; Editing by Richard Borsuk)

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