But a crucial indicator of implied inflation expectations is the level of actual wage settlements in the economy. Wage settlements that are above inflation and productivity growth threaten to undermine employment and pose a significant upside risk to the inflation outlook.
Settlements of this nature may force the Reserve Bank to adopt a tighter monetary policy stance in order to curtail their second-round inflation impact. I would like to emphasise that monetary policy is only one aspect of our country’s macroeconomic policies. The aim of monetary policy is not to drive growth directly, but rather to contribute towards a stable macroeconomic environment.