Poland sees solid employment growth, but wage growth remains soft

Data released by Statistics Poland on Monday showed that employment in Poland was up a solid 0.3% m/m in March. Wage growth however turned out to be a softer-than-expected 3.3% y/y. Data highlights the divergence between rising employment and steadily declining core inflation rate.

Polish unemployment rate has been declining steadily since 2014 but the Polish core inflation rate has steadily slipped lower over the same period, and finally dropped into negative territory by March. Low inflation could gradually seep into pricing and wage setting behaviour.

This suggests that the tightening labour market will not automatically cause a rise in inflation back to NBP's target range. Indeed, other CEE Central Banks already recognise the problem and have re-started monetary easing. NBP, on the other hand, states categorically that strong domestic demand will take care of its problems.

"Our base-case is that under its next governor, NBP will opt to lower its benchmark rate. In our view, this will not exert upward pressure on EUR-PLN as current levels are already overshot because of near-term political risks." said Commerzbank in a report.