Wage growth in the eurozone will accelerate/ ECB estimates an annual rate of 2.7% in the first quarter of 2027
Wage growth in the euro zone is expected to accelerate by early 2027, although it will remain well below previous peaks, the European Central Bank said, as it assesses inflation resulting from the Iran war.
The ECB's wage gauge projects wages to grow at an annual rate of 2.7% in the first quarter of next year, after rising by 2.6% in the third and fourth quarters. That is stronger than the forecast for the first six months, but still well below the peak of 5.2% in 2024.
“This increase over the year reflects the fading mechanical downward effect of the large one-off payments that were made in 2024 but not in 2025,” the ECB said in a statement. “Forward-looking information continues to point to sustained pressures on negotiated wages in 2026 and the first quarter of 2027.”
Policymakers are watching wages especially closely as they try to stop rising energy prices from turning into a sustained cycle of higher wages and prices, similar to what happened after Russia invaded Ukraine in 2022.
While officials kept borrowing costs on hold last week after a quarter-point hike in June, people familiar with the situation say they are prepared to raise interest rates again in September unless the inflation outlook improves significantly.
President Christine Lagarde stressed that the latest indicators confirm the predicted "gradual decline in wages", adding that "none of these elements, at the moment, are giving us indications of the effects of the second round".
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