This will be accompanied by measures … to contain inflationary pressures and enhance competitiveness”. These latter measures include more effective competition policies, and a review of administered prices to ensure that their increases are not higher than inflation unless there are compelling reasons. Furthermore, the proposals include a social accord to moderate or cap wage and salary increases.
Our interpretation of this is that the proposals recognise that the Bank’s mandate remains the achievement of low and stable inflation. In a low inflation environment, nominal and possibly real interest rates will be lower, and the real exchange rate will be more competitive because our prices and wages will not be increasing relative to those of our competitor countries.