The recent adjustment on wages and transport fares were within
government projections, but potential increases are being monitored for
their inflationary pressures, a central bank official said.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C.
Guinigundo said the P20 wage hike in the National Capital Region was
below economic managers’ assumed adjustment of P25.
However, he said the Monetary Board would be prepared to act
preemptively, given that consumers’ expectations of higher fuel and
food prices may stoke clamor for further wage hikes.
"We have already anticipated the wage hike, but we want to be
preemptive so that [our policy will be accommodative] of further wage
hikes," Mr. Guinigundo told reporters yesterday.
He also said the recent quarter-point hike of the Monetary
Board in its key policy rates was anticipatory, meaning it should be
able to "take care of the additional wage adjustment."
The second quarter Consumer Expectations Survey of the BSP
showed that more Filipinos expect that their spending on fuel and food
will rise in the next 12 months, hence, the possibility of new demand
for wage and transport fare hikes.
"If the wages are up, then the cost of production will rise.
It’s the same in transport fare adjustments. If transport costs go up,
transport of goods and services will also rise," Mr. Guinigundo
The Monetary Board decided to raise its key policy rates by 25
basis points (bps) in its meeting last June 5, noting that demand has
started to feed inflation in the wake of wage and transport fare
Inflation hit a nine-year high of 9.6% in May, and monetary
authorities said it could peak at 10%-11% in the third quarter before
it eases towards yearend.
Monetary authorities have said that the recent quarter-point
hike should be enough to counter inflationary pressures for now, given
that "second round effects" spilling over from fuel and food to wages
and transport fares have only just started.
However, they signaled a possibility of further tightening of
policy in the coming months given the expectations that the inflation
rate will rise further.
At the same time, they said the economy should be able to absorb the higher interest rates, as domestic demand remains strong.
Meanwhile, Dutch banking giant ING expects the central bank to
raise its key policy rates by 75 bps within the second half to end the
year, taking its cue from BSP Governor Amando M. Tetangco, Jr. when he
said that the Monetary Board is prepared to further raise its rates to
curb inflation and maintain price stability. ING also expected the
yields of fixed-rate treasury notes to rise. It expected the yield of
five-year benchmark to rise to 9.5% from its current level of 8.5228%
with-in the next three months, which could mean that yields in the
secondary market will continue with an upward bias. — Gerard S. dela Peña