Since the 2009 recession, employment creation in the formal non-agricultural sector of the economy has been mainly by government. Private sector employment growth is likely to remain muted as long as investment confidence remains low, and government is constrained by the need to maintain its fiscal consolidation path, limiting the possibility of further significant employment creation.
The issue then is, how can monetary policy deal with inflation driven primarily by cost-push pressures, and under such conditions should we not simply ignore these inflation pressures? Inflation expectations are central to price formation, and expectations of future monetary policy actions are an important element in this.