Polish Central Bank Ramps Up Messaging to Quell Wage-Boom Worry

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How much will a planned 78% increase in the minimum wage over four years impact Polish inflation? Not much at all, according to a growing number of central bankers.

Grazyna Ancyparowicz, a member of the central bank’s Monetary Policy Council, said in an interview the wage plan should be regarded as a campaign slogan ahead of next month’s election. If implemented carefully, it won’t have any significant impact on inflation, she said. Fellow MPC member Jerzy Kropiwnicki agreed.

Their comments echo those of central bank chief Adam Glapinski, who said last week that the ruling party’s program was neutral for economic growth and only mildly pro-inflationary. Analysts are more concerned, especially as price growth is already at a seven-year high and in the upper end of the bank’s tolerance band.

“Glapinski is being too sanguine on the wage-plan related risks but equally, expectations that inflation will be much higher seem overdone,” said Liam Peach, an economist for emerging Europe at Capital Economics.

Reasonable, Gradual

Ancyparowicz said the planned 16% minimum wage boost in January won’t push 2020 inflation beyond 3.5%, the upper end of the bank’s band, from 2.9% in August. The ruling party has made wage growth the flagship of its campaign for the Oct. 13 election, which polls show it should win.

“The increase in remuneration, including the minimum wage, is a must in Poland and that’s beyond any discussion,” Ancyparowicz said Saturday. “The government’s proposal is a step in the right direction, but as a plan it needs to be carried out in a reasonable and gradual way. For now, it’s mainly a campaign slogan.”

Kropiwnicki, who also spoke in an interview, cited initial calculations which indicate the wage-boom plan won’t boost inflation “significantly,” and consumer-price growth “will remain mainly cost-related.”

Glapinski said last week that the wage plan would have nearly no impact on inflation and that given the weak global growth outlook and monetary loosening in the U.S. and the euro area, Poland can cut its main rate from 1.5% if needed.

Economists at Santander Bank Polska said in a research note on Monday it’s not clear what ratio of minimum to average wage is the threshold when costs start to outweigh benefits, with 50% often cited as a rule-of-thumb. According to Bloomberg Economics, Poland’s minimum wage is already generous relative the median wage. The ratio is lower than in France and Portugal, but higher than in Germany as well as regional peers Hungary and the Czech Republic.

“Planning the minimum wage growth for next four years without much knowledge what the economic situation might be -- that’s an economically risky project,” Santander said.

Ancyparowicz said the minimum wage hike will add as much as 0.5 percentage point to inflation next year, while Kropiwnicki said the increase will be only 0.1%. The 10-member MPC left its benchmark interest rate at 1.5% this month and despite rising inflation it’s not likely to tighten policy amid global economic headwinds.

“A global slowdown clearly isn’t the best time to tighten monetary policy,” Kropiwnicki said.

To contact the reporter on this story: Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.net

To contact the editors responsible for this story: Andrea Dudik at adudik@bloomberg.net, Wojciech Moskwa, Andrew Langley

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