Analysts say MNB will hold rate

Though twelve-month gross wage growth slowed to 7.8% in July from 9.7% in June, and net wage growth slowed to 6.9% from 8.3%, private sector gross wage growth picked up to 9.3 in July from 8.9% in June.

Erste Bank’s Orsolya Nyeste said the July wage figures suggest that the start of an easing cycle is far from being not imminent. The pickup in private sector wages gives the bank further reason to remain caution and keep a tight monetary policy. Nyeste said that inflation figures, not wage figures would be the decisive factor for any loosening of monetary policy. The MNB needs to see CPI on a decisively downward path, which could happen in Q4, creating the chance for a rate cut next year.

ING Bank analyst Dávid Németh also said a rate cut was unlikely this year. He noted that, although gross wage growth slowed in July, part of the reason was because public sector workers are receiving their annual bonuses in twelve installments, rather than as a lump sum at the end of the year. Taking this into consideration, gross wages were little changed. Németh said the forint’s hectic exchange rate, as well decisions by the US Fed and the ECB to keep rates on hold, augur a rate cut by the MNB in 2009 at the earliest.

Brokerage Quaestor said in a statement that, although average wage growth was favorable, the acceleration of private sector wages, excluding bonuses, was a cause for concern. The brokerage does not expect the MNB’s Monetary Council to change rates for at least another two of its monthly meetings. (MTI-Econews)