Polish Pay Growth at 5-Year High Heaps Pressure on Central BankBy
Polish wages grew at the fastest pace in more than five years, casting fresh doubt over the central bank’s ability to keep a lid on inflation.
The readout showed a 7.4 percent wage increase in October from a year earlier, exposing a steeper acceleration than forecast by 23 of the 24 economists surveyed by Bloomberg. Wage growth was distorted by a cut in Poland’s retirement age by as much as seven years, which kicked in last month and created additional costs of dealing with a smaller pool of available labor, according to Pawel Radwanski, an analyst at Raiffeisen Polbank SA.
The data helped strengthen the zloty amid expectations that growing price pressures may push central bank Governor Adam Glapinski and his colleagues on the Monetary Policy Council to abandon plans to keep their 1.5 percent benchmark rate on hold until 2019. Headline inflation stands at 2.1 percent, near the policy makers’ 2.5 percent target, and derivatives show expectations of a quarter-point rate rise over the next 12 months.
“Rising wages, along with inflation, will be sources of displeasure for MPC members who want to keep borrowing costs unchanged next year,” said Grzegorz Maliszewski, the chief economist at Bank Millennium SA in Warsaw. “If similar job-market trends are maintained in future months, then markets will bet on an increase in borrowing costs.”