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(Bloomberg) — Mounting concerns over rising wages will likely convince Poland’s central bank to leave interest rates unchanged for an eighth consecutive month, or even longer.
First-quarter data on Monday showed consumption drove economic growth on the back of pay increases. Governor Adam Glapinski said last month that rapidly rising wages are the main source of concern for the central bank that prevent it from cutting rates.
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Policymakers will keep the benchmark at 5.75% on Wednesday, according to all 31 economists in a Bloomberg survey. Glapinski will brief media at 3 p.m. in Warsaw on Thursday.
The data for the first quarter will likely “add to the arguments used by the Monetary Policy Council to justify keeping interest rates ‘higher for longer’,” Santander Bank Polska economists led by Piotr Bielski said in a note.
Since coming to power late last year, the administration of Prime Minister Donald Tusk has increased salaries of teachers by 30% and by a fifth for other public sector workers, delivering on its pre-election pledges. Wages in the corporate sector have been growing at a double-digit pace almost every month for more than two years.
That’s why the vast majority of policymakers appears to have coalesced around the view that interest rates are likely to stay unchanged for the rest of the year, even as inflation is currently smack on target at 2.5%.
The other concern for the central bank is the gradual unwinding of measures aimed at keeping energy prices low. The government has already let tax cuts on food expire this year.
The meeting comes after the governor was officially notified by a parliamentary committee about a probe that may lead to his suspension from office. Glapinski, an ally of the previously ruling populists, has been accused by Tusk’s ruling coalition of engaging in politics, irregularities in the central bank’s bond buying program. He has repeatedly denied any wrong-doing.
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