Central Bank says it doesn’t go by micro level details of ‘salary inflation’

By Sanath Nanayakkare

The Central Bank yesterday said that they don’t go by micro level details of wage inflation when making its monetary policy decisions.

When The Island asked whether it considers the salary scales and increments of the low-skilled and semi-skilled workers in the economic system of the country when making their monetary policy decisions, an official said: “The wages are also a factor. We don’t go by micro level details of wage inflation. We are using the wage indices. So, maybe we are using the government sector wage indices and informal sector wage indices, and I don’t know whether Director- Statistics can make any comment on this”, she said.

Then another official in a follow-up reply said,” We take into account the informal sector wage indices which are published by us and also the government’s Wages Board has another index for them which is published by the Labour Department. Considering all these, we compile it. It is one of the many factors that we consider,” she said.

These remarks were made at the Q&A time after a technical session the Central Bank held to broaden the awareness of journalists on the rationale for the monetary policy decisions made by the Central Bank.

The Bank requested the journalists to specifically target their questions at the topic under discussion indicating discouragement of any other questions.

According to elibrary website of the IMF:

“Informal employment accounts for about two-thirds of employment in Sri Lanka. The informal sector is defined as a group of production units in the economy that are not captured by formal arrangement in terms of regulations and institutions. While the informal sector refers to production units, informal economy refers to activities by economic agents that are not captured by formal arrangements, and informal employment refers to jobs under informal arrangements. Economic activities in the informal sector are mostly legal but are not captured by official statistics for various reasons, such as the absence of tax payments and social security contributions and the exclusion from regulation such as company or employment laws.”