Hungary gross wages up 15.3% in July after 15.4% in June
Slowing Polish wage rises possible turning point
Double-digit wage rises hampering inflation fight
Czech wage rises more subdued, rate stability seen
Sept 23 (Reuters) - Hungary's gross average wages
grew by 15.3% in July after a 15.4% increase in
June, the seventh double-digit rise in a row as hefty pay gains
around central Europe throw up challenges to rate setters trying
to quell inflation surges.
After sharp rate hikes since last year, central banks around
the region are seeking to end policy tightening, growing wary of
damaging economies too much even as inflation has yet to peak.
But hot wage growth remains a risk, raising worries over
wage-price spirals - where high inflation leads to higher pay
demands, which fuel further price increases.
Besides Hungary, Poland and Romania have continued to see
double-digit wage growth roughly keeping pace with inflation.
In Hungary, still-high pay growth means the central bank
will have to walk a fine line as it prepares to assess ending
its cycle of rate rises, which have increased the base rate by
over 1,100 bps to 11.75%.
The bank could consider ending its more than one-year-long
rate hike cycle after next Tuesday's meeting when rates will
increase again, Deputy Governor Barnabas Virag said on Thursday.
"We expect another 100bp hike from the NBH (on Tuesday) but
the forward guidance may point towards a slowing pace in hikes
as CPI approaches the peak in Q4 2022," Citigroup analysts said
in a note.
The Hungarian release on Friday follows August data from
Poland showing the first strong slowdown in wage growth this
year, which some analysts said could be the first sign producers
are having trouble passing on higher costs and meeting pay
Oxford Economics said in a report earlier this month that
pay growth in Poland and Hungary had overshot "fair" values, but
was underperforming fundamentals in the Czech Republic. Fears of
wage-price spirals taking hold, though, were overblown, it said.
"While we don't expect the self-reinforcing cycles of higher
inflation and wage growth to persist, earnings growth is likely
to remain elevated, keeping core inflation in CEE higher for
longer," Oxford Economics economist Mateusz Urban said.
Persistent inflation pressure could mean interest rates
staying elevated for longer, or even rising further, analysts
In the Czech Republic, which has the lowest unemployment in
the European Union, wages have been more subdued, rising 4.4%
year-on-year in the second quarter, which was a real decline of
almost 10% when factoring in inflation.
That is taking pressure off the central bank as a new board
seeks to continue keeping interest rates stable, after it halted
a year-long cycle of hikes totalling 675 basis points last
(Reporting by Krisztina Than in Budapest and Jason Hovet in
Prague; Editing by Jan Harvey)