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Polish Wage Growth Quickens, Bolsters Case for Higher Rates

Polish corporate wages grew faster than forecast in June, bolstering arguments that the central bank may need to raise borrowing costs for a fifth time this year to head off a spillover effect on prices.

Corporate wages rose 5.8 percent from a year earlier, compared with 4.1 percent in May, the Central Statistical Office reported in Warsaw today. The median estimate of 22 economists in a Bloomberg survey was 5.5 percent. Wages advanced 3.3 percent on the month.

“Faster-than-expected wage growth shows that we’re out of the range deemed safe in terms of triggering second-round effects by people like central bank Governor Marek Belka,” said Piotr Piekos, an economist at Bank Pekao in Warsaw. “In that sense, the reading supports expectations for another rate increase this autumn.”

The Narodowy Bank Polski raised the seven-day interest rate in four stages to 4.5 percent this year from a record-low 3.5 percent as economic growth quickened, boosting inflation above the central bank’s target. Core inflation is expected to quicken to the fastest in 18 months to 2.5 percent in June from 2.4 percent the previous month, according to a Bloomberg survey of 18 economists.

The zloty stayed weaker against the euro after the data, trading at 4.0366 at 2:47 p.m. in Warsaw, down 0.6 percent on the day. The yield on the five-year Treasury bond maturing in April 2016 was little changed after the data at 5.34 percent, up from 5.30 percent on July 15.

Coal Bonuses

Faster wage growth in June and July can be expected because of big bonus payments paid in the coal-mining industry, especially at Europe’s largest coking coal producer Jastrzebska Spolka Weglowa SA, which began trading on the Warsaw Stock Exchange on July 6, said Maja Goettig, chief economist at Bank BPH in Warsaw.

“Wages will be a key indicator for the Monetary Policy Council to keep its eye on to determine whether, in conjunction with above-target inflation, it’ll be necessary to increase rates again,” Goettig said by phone.

The Monetary Policy Council will hold its next rate meeting in September. Core inflation data will be released on July 20.

Employment rose 3.6 percent on the year, expanding at the same rate as in May. The figure compares with the 3.5 percent median forecast of 20 economists in a Bloomberg survey.

Dorota Bartyzel in Warsaw at

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