Key facts
- Negotiated wage growth in the euro zone is slowing, according to ECB data.
- ECB data indicates negotiated wage growth around 2.6% by end-2026, down from 3.2% last year.
- Wage growth between 2% and 3% is considered consistent with the ECB's 2% inflation target.
- The ECB recently raised its benchmark rate to 2.25%.
- ECB Governing Council member Gabriel Makhlouf believes a US-Iran peace deal would not rapidly alter euro-area inflation.
Euro zone negotiated wage growth is showing signs of slowing, offering relief to European Central Bank policymakers who feared that recent inflation surges could trigger a self-reinforcing cycle of pay demands. Data from the ECB's wage tracker, which includes figures up to the end of May, indicates that negotiated wage growth is projected to be around 2.6% by the end of 2026, a decrease from 3.2% recorded last year. The ECB has previously stated that wage growth between 2% and 3% is compatible with its 2% inflation target. This easing wage pressure may reduce the urgency for the ECB to implement further interest rate hikes. The central bank recently increased its benchmark rate to 2.25% after inflation surpassed 3%, primarily to manage inflation expectations. Meanwhile, ECB Governing Council member Gabriel Makhlouf commented that a potential peace deal between the US and Iran is unlikely to quickly alter euro-area inflation and may not prevent further rate increases.