FRANKFURT, February 9 (Reuters) – Wage growth in the euro zone is expected to accelerate in early 2024, but its future trajectory remains uncertain, according to a new indicator developed by the European Central Bank (ECB) and whose results were published on Friday.
During its last monetary policy meeting, the ECB insisted that wage growth would be the most important factor in deciding whether or not to cut rates.
Its new wage tracking indicator, detailed for the first time in a document published on Friday, shows that pay growth is expected to peak at around 5% early this year in the eurozone.
However, the future trajectory of wage growth remains uncertain, although it must reach 3% to be compatible with an inflation target of 2%, according to the central bank.
“Salary negotiations in the first quarter of 2024 will probably be decisive for the evolution of remuneration in 2024,” underline the authors of the study.
The new ECB indicator, often mentioned by the institution’s chief economist, Philip Lane, is based on individual wage agreements in Germany, France, Italy, Spain, the Netherlands, Austria and Greece to give an estimate of wage pressures and sentiment.
The ECB then projects future wage growth based on how macroeconomic variables drive wage deals.
(Report Francesco Canepa, French version Corentin Chappron, edited by Sophie Louet)
©2024 Thomson Reuters, all rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. “Reuters” and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.