MANILA, Philippines – (UPDATE 2) The Bangko Sentral ng Pilipinas (BSP) said it would review its monetary policy if wage increases were high enough to push prices up, BSP Gov. Amando Tetangco Jr. said on Wednesday.

"Let's say there's a second-round (inflation) effect, then we will have to review our monetary policy stance and see if there's a need to tighten," Tetangco told reporters.

The central bank is widely expected to keep interest rates steady at a meeting on Thursday. The bank has repeatedly said that monetary policy is not a suitable tool to deal with rising oil and other commodity prices, which have boosted inflation.

But Tetangco told reporters that the monetary board was closely monitoring calls from labor groups for a rise in private workers' minimum wages, which signal a spread of inflationary pressure beyond supply factors.

"It (a wage increase) is still under discussion. Once it's approved and implemented, that's when (we review)," Tetangco said.

Regional wage boards are meeting on Friday to discuss raising salaries of workers who face rising costs of rice, fuel and other basic commodities.

In Manila, it takes between 30 to 45 days to agree on wage increases.

The central bank can mop up cash that would otherwise be used for household and business spending by increasing its benchmark interest rates or the reserve requirement on banks, among other measures.

The central bank's overnight borrowing rate is at 5.0 percent, the lowest since May 1992, while the lending rate is at 7.0 percent.

Annual inflation in March hit a 21-month high of 6.4 percent, mainly due to a surge in rice costs and far above the central bank's inflation target of 3.0 to 5.0 percent for the year.

Inflation last year averaged 2.8 percent, the lowest since 1986, partly due to a 19-percent rise in the peso against the dollar, which countered imported inflation. So far this year, the peso is down around 1.6 percent.

But while increases in consumer prices are now higher than the government’s target, the BSP is constrained from using preemptive measures given the dampening effect of a US-led global economic slowdown, analysts have said.