Euro zone wage growth seen rebounding slightly next year, ECB says
Euro zone wage pressures are likely to pick up slightly in the first nine months of next year as policymakers watch for signs that elevated inflation is feeding into salaries. The outlook comes as the European Central Bank keeps interest rates unchanged for now but signals that another increase could come at its next meeting.
Highlights
- ECB wage tracker shows pay hikes at 2.7% in H2 2024, falling to 2.4% in Q3 2025 based on a limited sample.
- Excluding one-off payments, ECB wage tracker forecasts growth from 2.6% in 2026 to 2.8% in first three quarters of 2027.
- ECB kept interest rates unchanged last week but signaled a possible hike next meeting as modest wage rebound sustains inflation concerns.
ECB wage tracker signals modest pickup
As reported by Reuters, citing the European Central Bank, its headline wage tracker for active collective bargaining agreements puts pay hikes at 2.7% in the second half of this year.The measure, which smoothes one-off payments over 12 months, then points to a decline to 2.4% in the third quarter of next year, although the ECB says that projection is based on a limited sample. Excluding one-off payments, the ECB's wage tracker rises from 2.6% in 2026 to 2.8% over the first three quarters of 2027.
Inflation outlook and policy implications
The wage data is closely watched because the ECB is looking for any sign that the recent, energy-fuelled rise in inflation is spreading into broader salary growth.The central bank kept interest rates steady last week, but it also hinted that it could raise them at its next meeting. A modest rebound in negotiated wages would keep labour costs in focus as the euro zone assesses whether inflation pressures are becoming more persistent.
Our earlier article on Mario Draghi’s warning about the inflation–debt dilemma explained how prolonged interest rates above growth can worsen debt dynamics and intensify pressure on central banks, even as they try to keep inflation under control. We also noted his argument that, where possible, policy should avoid being more restrictive than needed because higher borrowing costs can weigh on investment, productivity, and long-term growth.
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