Number of years in the labor force increased in CEE

On the radar

• Hungarian central bank cut the policy rate by 25 basis points to 6.75% on Tuesday’s meeting.

• Growth of wage arrived at 14.9% y/y in June in Hungary.

• Otherwise, there are no releases scheduled in the region.

Economic developments

Today we look at the labor market indicator that tells us about the duration of working life. It is an estimation of the number of years a person, currently aged 15 years, is expected to be in the labor force (i.e. to be employed or unemployed) throughout his or her life. Over the last decade, the average for the CEE7 has increased by slightly more than two years. Ten years ago, a 15-year-old person was expected to work 33.1 years, while in 2023 the duration of working life averaged 35.4 in CEE7. Interestingly, the duration of working life increased for women more (by three years) than for men (a little less than two years). The change in the duration of working life comes next to other relevant developments, such as increased longevity, dropping fertility rates and shrinking workforce in the region.

Market developments

Hungarian central bank reduced the policy rate by 25 basis points to 6.75% on Tuesday’s meeting. Market analysts were divided on the expected outcome of today's rate-setting meeting as the monetary council indicated a month ago that a new phase of the monetary policy would start in the second half of 2024. Nevertheless, falling inflation and improved risk assessment permitted the continuation of rate cuts, amid the ongoing hawkish communication of the central bank. As the outcome of today’s meeting came as a small surprise to us, we think that there is potential for additional minor rate cuts at quarter-ends. Consequently, we have modestly lowered our year-end policy rate forecast to 6.25% from 6.50%. In Czechia, Vice Governor Frait said that the central bank arrived at the point at which fine-tuning of monetary policy begins. He will be deciding between 25 and 50 basis points cut at the upcoming meeting due to surprisingly low inflation in June. The Czech koruna has weakened against the euro since the beginning of the week, while the Hungarian forint and the Polish zloty have been relatively stable. The long end of the curve remains marginally lower this week in the region.

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