MNB: Inflationary impact of higher wage growth may be ‘moderate’

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The National Bank of Hungary (MNB) raised its projections for wage growth this year and next in a quarterly report released today, but it said the inflationary impact of the increases could be moderate, according to Hungarian news agency MTI.

“The inflationary effect of accelerating wage outflows may be moderate, however, owing to the low labor share, subdued inflation expectations and the negative output gap,” the MNB said in its fresh Inflation Forecast. 

The MNB raised its projection for wage growth this year to 6% from 4.6% in the previous report published in March. It raised the projection for wage growth next year to 6.1% from 4.1%. 

Private sector wages are set to climb 5.3% this year and 5.8% next year, both about one percentage point more than projected in the March report. Private sector unit labor costs are seen rising 3.7% in 2016 and 3.8% in 2017. 

The MNB raised its projection for this yearʼs average annual inflation to 0.5% from 0.3%. The forecast for 2017 was raised to 2.6% from 2.4%, still under the mid-term 3% “price stability” target. 

Core inflation, which excludes volatile food and fuel prices, is expected to reach 1.5% this year and 2.9% next year, showing the impact of low global crude prices on headline CPI. 

“Oil prices expressed in euro continue to be at low levels, and futures prices project a modestly rising path,” the MNB said in the report.

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