Gross average wages in Hungary increased by an annual 15.4% in June, a rise from May’s 14.9% rise, indicating ongoing robust wage pressures within the economy.

Double-digit wage increases during double-digit inflation have surfaced as a major policy challenge of central banks, particularly in Hungary and Poland, where massive rate hikes haven’t managed to combat the rate of price growth.

"Second-round inflation impact via wage increases is probably gaining dominance in CEE countries," according to Commerzbank analysts.

Real wages still increased by 3.3% in June when annual inflation stood at 11.7%, said Hungary's Central Statistics Office. Since June, inflation has increased to 13.7% in July and is now seen nearing 20% later in the year, which will surpass the huge wage increases, Reuters reports.

Economic growth within economies in Central Europe has fared well so far, despite soaring energy prices and supply chain disruption, fuelled by strong domestic demand. Yet, even with the solid wage growth, mounting inflation and energy prices have begun to impact purchasing power, which may result in a slowdown over the next few months.

Back in June, the National Bank of Hungary forecast private sector gross wage growth would range between 13.2% and 13.8% in 2022, which may present additional upside risks to inflation. The central bank is predicted to hike interest rates again next Tuesday.

"Since there is strong competition for skilled labour force in all sectors, robust wage growth is likely to persist, which increases the risk of rising underlying inflation developments," the National Bank of Hungary said in June.

Notwithstanding the global recession risk in the autumn, deputy governor of Hungary’s central bank, Barnabas Virag said earlier this month that the bank should continue monetary tightening and utilise all available tools to attempt to curtail inflation.

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