Bloomberg News

Polish Wage Growth Slows, Gives Central Bank Room on Rates

June 16, 2011

(Updates with zloty, bonds in fifth paragraph, zloty, bonds in seventh.)

June 16 (Bloomberg) -- Polish corporate wage growth slowed in May from a 16-month high, suggesting the central bank may not need to override its governor’s preference for taking a break from increasing interest rates.

Corporate wages rose 4.1 percent on the year, compared with 5.9 percent in April, the Central Statistical Office reported in Warsaw today. The figure was below the median forecast of 5.4 percent in a Bloomberg survey of 25 economists.

“The data clearly reduce the likelihood of a July rate increase, which had grown after the May consumer price data,” Jakub Borowski, the chief economist at Invest-Bank SA in Warsaw, said by phone. “It’s evident there’s no wage pressure.”

The Narodowy Bank Polski raised its benchmark seven-day rate by a quarter-point to 4.5 percent on June 8, the fourth increase this year, to curb inflation that has remained above the central bank’s 2.5 percent target since October.

The zloty was little changed after the data release and traded at 3.9817 per euro at 3:56 p.m., 0.9 percent weaker on the day. The 10-year Treasury bond price pared its decline after the publication and yielded 5.91 percent, compared with 5.89 percent yesterday.

Wait to See

Inflation accelerated to 5 percent in May, the highest in almost a decade, the Central Statistical Office reported yesterday. While faster price growth prompted Raffaella Tenconi, an economist at Bank of America Merrill Lynch in London, to predict policy makers may need to raise rates for a fourth month in July, central bank Governor Marek Belka said last week the Monetary Policy Council would wait to see if this year’s rate increases will be sufficient to slow inflation.

The inflation rate will diminish as economic growth slows later this year, central banker Andrzej Bratkowski said yesterday in a Bloomberg interview. Continuing to increase interest rates until inflation slows to the central bank’s target would be an “overshoot,” he said. Economy Minister Waldemar Pawlak said today he “hopes” the central bank will stick to its plan to pause policy tightening.

Annual inflation may remain at a “relatively high level” with the rate “probably” exceeding the central bank’s upper target limit of 3.5 percent throughout this year, the Monetary Policy Council cited some members as saying in the minutes of its June 7-8 meeting, published today.

The minutes cited other central bankers saying that fast wage growth in April may have been due to delayed first-quarter bonus payouts at mining and power companies, while high unemployment “reduced the risk of a mounting wage pressure.” The jobless rate was 12.6 percent in April, the highest rate for that month in four years.

Employment increased an annual 3.6 percent in May, down from 3.9 percent in April, compared with the 3.8 percent median forecast by 20 economists in a Bloomberg survey.

--With assistance from Monika Rozlal and Barbara Sladkowska. Editors: Alan Crosby, David McQuaid

To contact the reporters on this story: Dorota Bartyzel in Warsaw at; Katya Andrusz at

To contact the editor responsible for this story: Balazs Penz at

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