Polish corporate wage growth surged to 9.1% y/y (a fresh 7 year high) in March, far above the 6.5% y/y market consensus, which basically cements expectations for a rate hike in April. Moreover employment growth inched up by more than expected, to 4.5% y/y, which is in fact the fastest annual rate of increase ever recorded.
Along with Friday’s industrial production data, which should show a modest decline in y/y growth, today’s figures point to a massive deterioration of productivity and rise in unit labor costs, which if sustained would point to a greater than expected risk to inflation from the labor market. The data will surely be a hot issue in the discussion within the MPC next week but with the rate meeting just days away the Council will have little time to asses the information and search for clues regarding one-off factors which may have influenced the result. Hence even though we are fairly certain that the Council will raise rates next week and that it will retain its restrictive bias we also believe that the MPC moderates will prefer to wait for more data before giving any suggestions more a vigilant policy path in the latter part of the year.