With government workers asking for higher wage increases than the 10,5% announced on Wednesday, the spectre of strikes and second-round inflationary effects looms.
This is the view of global analysts Lehman Brothers, which says that this does not look positive for next week’s inflation expectations number (due on June 12 ahead of the monetary policy committee meeting) if the unions are assuming that an expectation of 9,5% is too low.
The last comparable reading was 7,8% from the quarter-one inflation expectations survey.
It was announced on Wednesday that government workers would be awarded a 10,5% pay increase (1% real) for this year.
“However, the unions are not happy given the assumption of average inflation of 9,5% between April 2008 and March 2009 [our own forecasts put this number at about 10,7%],” says Lehman.
“They have asked for more and this could well lead to the spectre of strikes, as well as more second-round effects to inflation if they do get more,” concluded the analysts. — I-Net Bridge