Wages are no longer an inflationary problem for the European Central Bank

The great concern of the European Central Bank (ECB) at the end of last year is no longer such. The increase in salary, which threatened a few months ago from the creation of an inflationary spiral from which it would be very difficult to leave, it was moderate: if in February, it was minimal not seen since before the last inflationary crisis (2021), the latest forecast data for the rest of the year have published confirms that price stability has already been carried out. The data on negotiated wages remain an average of 3.1%for all of 2025, a percentage which corresponds to the objective of the inflation of the ECB (2%) if the expected increase in productivity in the euro zone is added, by 1%. With the target of inflation, according to this indicator, the ECB has a free way to continue to lower the types if it wants to increase the growth of the euro zone.

The ECB “employee tracker” is one of the advanced advanced indicators of the Central Bank to analyze inflationary pressures that can reach the labor market. This is an indicator that includes the agreements to which the unions and the employers have reached, it therefore serves to measure the increase in the salary which will occur in the coming months, if only this indicator is followed.

In February, the index gave a very positive signal for the ECB, because it returned to the levels not seen since 2021, just before the last inflation crisis in the euro zone and the United States began. Now in The latest update of data published by the Central Bank, it is confirmed that wages will no longer be a source of inflationSince the agreements between unions and employers have left the average salary of the euro area of ​​3.1%, which corresponds to the objective of the price stability of the ECB.

The question of wages is essential for the ECB to reach its inflation objective, and Christine Lagarde recognized at the end of 2023, when he indicated that most of the Euro zone inflationary pressures were already, at the time, generated by salary increases, and not by other problems, such as high energy prices. Consequently, that the favorite salary indicator of the ECB has once again complied with the inflation target of 2%, it is so important now for the central bank.

“Advanced information suggests that the pressure on negotiated wages will be softened, in general, in 2025, in a coherent manner with the data published after the monetary policy meeting in March,” said the ECB in the publication of the last negotiation index. The decrease in the growth of negotiated wages is already in line with the objective of inflation of 2%, as explained by David Powell, economist of the analysis team of the analysis of the analysis of the analysis of Bloomberg:: “The 3% increase in wages generally corresponds to the price stability of the central bank, Given the objective of inflation is 2% and that the growth of long -term productivity in the euro zone is around 1%, “explains Powell.

It allows the ECB to reduce interest rates

Without concern that the salary again increases an increase in inflation, or even an inflationary spiral from which it is very complicated to leave, the ECB will be free in the coming months to continue the process of falling types. From now on, the main engine that moves inflation expectations seems to be the prices that the Trump administration could impose on the euro zone.

However, this is not worried about Lagarde: although it is true that the consensus of analysts considers that the American price of the ECB.

In this way, everything indicates that The ECB has a free way to continue with the type reduction process in the coming monthsAt a time when the market buys three reductions of 25 base points from here to finish the year. This scenario corresponds to the moderation of wages in the euro zone, as well as another of the most important problems for inflation, energy prices, in a year when the price of the barrel of European oil, the BrentMore than 14% fell.