Wage growth cools to 4.5% soothing fears over inflation
Rate The Deciding Growth For Want Cuts To First Before Wage Will On Data Quarter Wait Ecb Definitely
Pay agreements in the eurozone rose 4.5% at the end of 2023, according to the European Central Bank — soothing fears that rising salaries could sustain inflation above its target.
While still high, fourth-quarter pay growth is down from a eurozone record of 4.7%, notched in the previous three months, the ECB’s negotiated wage indicator showed.
The gauge — which signals possible pay pressures by crunching non-harmonised country data — had been more eagerly awaited than normal this time as officials in Frankfurt zero in on labour costs as a key factor in deciding when to cut interest rates.
Many, though, are even keener to see numbers for the first quarter of 2024 — due in May — before sanctioning a loosening of monetary policy.
“This slowing in wage growth at the end of last year should bring some relief that the feared wage-price-spiral will not unfold in the eurozone,” said Carsten Brzeski, global head of macro at ING.
But “the ECB will definitely want to wait for first-quarter wage growth data before deciding on rate cuts", he said.
ECB president Christine Lagarde last week singled out salaries as “an increasingly important driver of inflation dynamics in the coming quarters” while cautioning against “hasty decisions” on easing policy without assurance that price gains are headed back to the 2% target.
Meanwhile, Central Statistics Office figures show that its employee index rose 1.8% in December from a year earlier, in a sign that the Irish economy continues to grow.
The index showed that on a monthly basis construction and public administration posted the largest increases from November.
- Bloomberg and Irish Examiner