BSP closely monitors wage levels for clues on future inflation

Bangko Sentral from the Philippines. (File photo / Philippine Daily Inquirer)

The central bank will closely monitor the local labor market to ensure that wage levels strike a balance that promotes productivity while helping to keep the inflation rate under control.

This is how the governor of Bangko Sentral ng Pilipinas (BSP), Benjamin Diokno, said this weekend, stressing the agency’s mandate to promote price stability in a context of “evolving wage dynamics” and its ability to influence price increases. “The country’s low and stable inflation and calibrated wage adjustments over the past few years are a testament to the cautious and steady collaboration between the BSP and the wage boards,” he said in an online briefing. “The BSP serves as a resource institution within regional wage councils, providing information on inflation, other key macroeconomic trends and the impact of wage decisions on inflation. Our goal is to help provide guidance in setting the minimum wage, ”he added. “In this perspective, PASB will continue to actively participate in discussions on salary policies. COVID-19 has had a direct impact on the economy, as lockdown restrictions and other measures implemented to curb the spread of the virus have left many Filipinos jobless. As unemployment and underemployment are on the decline, much remains to be done to improve labor market conditions for the sector to fully adapt and recover from the pandemic.

In general, central banks monitor the relationship between labor market outcomes, wage dynamics and inflation. In particular, the pandemic has had a significant impact on the labor market landscape, such as the reduction in face-to-face interactions in industries coupled with the rise of digitization and the automation of jobs around the world.

Accommodation policy

Changes in labor market outcomes are likely to influence productivity and wage adjustments, particularly how wages will vary across sectors and how quickly wages will increase in the future. The BSP chief said the agency’s monetary policy assessment takes into account domestic demand and labor sector conditions.

The central bank recognizes the importance of micro, small and medium enterprises (MSMEs) in the creation of jobs and economic activities. To this end, PASB continues to allow bank lending to MSMEs to be seen as an alternative to meeting a bank’s minimum reserve requirement.

“PASB believes that enabling policies to promote long-term, sustainable and inclusive economic growth and productive employment are essential as we emerge from the pandemic,” Diokno said, adding that the changes in the market The labor force caused by COVID-19 will continue to fuel short-term wage dynamics. Meanwhile, the central bank chief said the agency would continue to maintain accommodative monetary policy measures, for as long as needed to help the economy recover. INQ

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