Romania: Strong wage growth continues

Wage increases in the public sector stood at 23.4% YoY, while pay rises in the private sector are at 11.8% YoY. A tight labour market with an unemployment rate near historical lows, labour market frictions, lack of reforms, migration and public wage policy are the main drivers for this wage growth.

Despite a flatter Phillips curve, the tight labour market remains a factor for upside risks to the inflation outlook. Hence, we expect the National Bank of Romania to raise its key rate twice, by 25 basis points each, ahead of the first ECB rate hike.