FPXE - Drop In Eurozone Negotiated Wage Growth Brings Relief To ECB

2024-02-20 11:12:00 ET

Summary

• The decline in negotiated wage growth from 4.7 to 4.5% year-on-year confirms expectations that wage growth is no longer accelerating.
• But it is too small to open the door to an ECB rate cut in March.
• With wage growth expected to trend down carefully from here, we expect modest ECB cuts starting in June.

By Bert Colijn , Senior Economist, Eurozone

Wage growth is the number one worry for the ECB at the moment, as has been stressed by European Central Bank President Christine Lagarde time and again in recent speeches. While we anticipate that wage growth will moderate significantly over the course of 2024 on the back of abated inflation and weakened economic conditions, it must come as a relief in Frankfurt that negotiated wage growth fell from 4.7 to 4.5% in the fourth quarter....

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