The European Central Bank sees"very strong" wage growth in the months ahead. The European Central Bank predicts wage growth – a key indicator of where inflation is headed – will be “very strong” in the coming quarters, strengthening the case for more interest-rate hikes.
A study of salary developments since the start of the pandemic shows underlying pay growth has been “relatively moderate and is currently close to its long-term trend,” the institution said on Monday in an article to be published in its Economic Bulletin. Even so, “looking ahead, wage growth over the next few quarters is expected to be very strong compared with historical patterns,” it said. “This reflects robust labour markets that so far haven’t been substantially affected by the slowing of the economy, increases in national minimum wages and some catch-up between wages and high rates of inflation.”
With forecasts showing 2 per cent inflation will be elusive until end-2025 and trade unions pushing for generous compensation packages, the ECB has delivered an unprecedented series of rate increases that took the deposit rate to 2 per cent last month.
Source: Loan Digest (loandigest.net)
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