This Monday, the Governor of the Bank of Portugal said that tightening monetary policy more than necessary could jeopardize investments and the aspirations of workers, and that wage increases must be carried out with caution.
In the analysis of the consequences of developments in the European labor market for the evolution of inflation carried out by Governor Mário Centeno, published this Monday by the Bank of Portugal (BdP), one can read that “monetary and fiscal policy must recognize the problems of the labor market, recognizing that the demand for labor is the “demand arising” from economic activity.”
According to Mario Centeno, “maintaining the investments and aspirations of workers is incompatible with tightening policies more than necessary.”
The head of Portugal’s central bank argues that “wage increases must be carried out with caution”, believing they should be driven by productivity growth, as seen over the past 35 years.
“The success of an economy is measured not only by its global performance, but also by the success of those who are little included or excluded. It is very important to act on the margins,” he says.
The governor believes that monetary policy has worked, but with the usual lag, and therefore recommends “be patient.”
“The function of economic policy remains to stabilize the economy and financial conditions. Therefore, we must remain true to the principles of recognizing data, presenting options and responding only when necessary,” he notes.
Mario Centeno reiterates that the labor market remains the eurozone’s largest asset and must be preserved.