While January inflation data in Poland and Hungary came in slightly below market estimates, they are still projected to run the European Union's highest 2023 inflation rates based on the European Commission's latest economic forecasts. The European Bank for Reconstruction and Development also warned in a survey published on Thursday that reducing inflation in emerging Europe may take longer than expected, based on experience of previous bouts of strong price growth. "We will have to see whether you have persistent wage pressure and wage expectations really becoming de-linked from economic growth and productivity and whether that causes additional external imbalances," Barriga Salazar said. "That is a risk, but at the moment it is only a risk." Hungary's inflation problem appeared to be more persistent, Fitch Associate Director Malgorzata Krzywicka said, highlighting rapid food price growth and a steady climb in services prices, which rose by an annual 11.3% in January. "Even though under our baseline forecast we expect inflation to go down in Hungary, there are more reasons for why it could stay higher for longer than there are for Poland," Krzywicka said. Fitch lowered Hungary's credit rating outlook to negative from stable last month, citing vulnerabilities stemming from a policy mix influenced by political considerations, including price caps and windfall taxes on some businesses. The National Bank of Poland (NBP) left its main interest rate unchanged at 6.75% last week, while the National Bank of Hungary (NBH) said a "patient approach" was required after leaving the EU's highest benchmark on hold at 13% last month. (Reporting by Gergely Szakacs; Editing by David Holmes)
By Gergely Szakacs
BUDAPEST, Feb 16 (Reuters) - A nascent trend for some
services companies in Poland and Hungary to bump up their
charges in line with broader rising prices could be a pointer to
higher and more durable inflation rates, a credit rating agency
executive has warned.
Telecoms firm Orange Polska said on Thursday it was
"strongly considering" triggering inflation clauses in new and
renewed contracts, after Deutsche Telekom's Hungarian
unit matched last year's 14.5% inflation rate across its
consumer services contracts.
"This is something we have to follow," Federico Barriga
Salazar, a director at Fitch Ratings, told Reuters on Thursday.
"This is one of the challenges around having inflation higher
for longer.
"If this becomes generalised that you have services
indexation then this would add to further long-term pressures on
inflation. That would make central banks' task in reducing
inflation even harder," Salazar said.
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