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The
ECB has singled out wages as the single most important variable
in determining whether it can start cutting interest rate and
call time in fight against high inflation.
Its new wage tracker, detailed for the first time in a paper
published on Friday, showed growth in compensation was seen
hitting a peak at around 5% early this year.
But the jury was still out on whether and how quickly pay rises
would fall back towards the 3% level that the ECB considers
compatible with its 2% inflation goal.
"Negotiations over the first quarter of 2024 are likely to be
decisive for the development of wage pressures over 2024," the
authors of the paper wrote.
Often cited by ECB chief economist Philip Lane, the ECB's new
tracker uses data from individual pay agreements in Germany,
France, Italy, Spain, the Netherlands, Austria and Greece to
estimate wage pressures and gauge sentiment.
The ECB then tries to forecast future wage-settlement growth
based on how key macroeconomic variables tend to predict pay
deals in each country.
(Reporting By Francesco Canepa; Editing by Hugh Lawson)
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