GUS said the average gross wage was 3,137.74 zlotys ($1,443.90) in April, down from PLN3,144.41 in March. The wage figures, despite slightly lower-than-expected April annual inflation of 4.0%, may support policy hawks on Poland's rate-setting Monetary Policy Council or RPP, pushing for a 25 basis points rate hike at the end of May.
April's industrial production data, out yesterday, will also be important in discussions on the next policy move.
Total employment at firms with more than nine employees amounted to 5.39 million in April, up 5.6% on the year. This slightly lower than expected employment rise may provide central bank "doves" with an argument for leaving the key rate at 5.75%.
Central Bank policy maker Halina Wasilewska-Trenkner will almost certainly not be one of these however, and she was out this week arguing interest rates should be raised immediately to help bring the inflation rate back toward the central bank's target.
Wasilewska-Trenkner said the inflation rate, which was 4 percent in April, will be around 3.5 percent and 4 percent at the end of this year, and won't fall below the 3.5 percent upper limit of the bank's target until 2010. She doesn't expect the central bank's June inflation outlook to change its tone from the previous forecast in February, which assumed slower growth of fuel prices and wages.
``There is still room for an interest rate increase'' and ``the sooner it happens, the better.....One or two hikes would be enough as the policy tightening cycle is about to end.......There is no point in waiting for the projection release to change rates as there are still forces in the economy driving inflation........ Dynamic wage growth, which won't be matched for another month by labor productivity, may denote that we have to deal with second-round effects and must intensively work to set up a barrier against further price growth.''
Fellow policy maker Andrzej Slawinski basically seems to agree with her:
``The worsening business climate due to weaker growth prospects and stronger zloty'' does not rule out ``further monetary tightening because of still double-digit rate of growth in wages,'' Slawinski said.
Fellow rate setter Marian Noga told TVN CNBC yesterday that he will vote in favor of a rate increase this month, while council member Andrzej Wojtyna said one boost can be made ``in the immediate future,'' the daily Rzeczpospolita reported yesterday.
The inflation rate, which has been hovering close to a four- year high, unexpectedly slipped to 4 percent in April from 4.1 percent in March as the advance of the zloty against the euro helped to curb import prices and growth in food prices slowed. The rate is still above the central bank's 2.5 percent target. The zloty has gained 5.7 percent against the euro this year and reached a more-than 6 1/2 year high of 3.3785 on May 14
The central bank has raised the key rate seven times in the past year to 5.75 percent in an attempt to damp inflation as a buoyant labor market, with salaries growing an average 10 percent, and record-high employment drive demand for consumer goods, but at some point the central bankers will begin to worry that raising interest rates and boosting the zloty may begin to undermine the competitiveness of Polish exports, and basically at that point the only real arm the Polish administration will have left is running a fiscal surplus to drain demand via that route out of what seems to be slowly becoming an "overheated" economy.