Hungarians have experienced the negative impacts of inflation firsthand. Government-backed programs have contributed to Hungary’s struggles with inflation, which have been more severe than those in other European countries. However, the situation is gradually improving.
Wages in Hungary
Yesterday’s data on wages in Hungary revealed an impressive increase of 14.1%. This country has grappled with exceptionally high (over 25%) inflation for an extended period. As a result, the cost of living and wage expectations soared. However, the current rate of price change is +5.5% per annum. This means that Hungary is experiencing the opposite situation compared to its high-inflation period, when the price increase index exceeded wage growth by almost 10%. If wage growth exceeds inflation by more than 8%, it indicates that the average Hungarian’s situation has improved over the year. Unfortunately, inflation affects people more or less equally, while wage growth primarily benefits those who received a raise. This creates a disparity in the average’s distribution.
Turbulence in the Major Currency Pair
Yesterday, many analysts predicted an attack on significant support levels for the euro-dollar pair. Within a few hours, the dollar strengthened against the euro by nearly 1%. This move, however, was short-lived, and the pair reversed direction. This morning, we witnessed another move, this time upwards. As a result, after two significant swings, we have returned to the starting point. The cause of these strong movements remains unclear. Considering the expectation for interest rate changes before next week’s decision in the United States, the market seems rather subdued. Therefore, seeking explanations in this direction might not be fruitful.
Japan’s Interest Rate Stance
Given that the Bank of Japan last changed interest rates in early 2016, it is unlikely to be very active in this area. Moreover, even in that instance, it was the first move in nearly three years and only by 0.1%. Since then, Japan has maintained a negative interest rate of -0.1% for eight years in an attempt to stimulate the economy by accelerating inflation. However, unlike Western countries, the peak of inflation in Japan last year barely reached 4%.
Maciej Przygórzewski – chief analyst at InternetowyKantor.pl and Walutomat.pl
