Key facts
- ECB wage tracker projects 2.6%-2.7% negotiated pay growth through Q1 2027.
- ECB wage tracker projects pay growth to reach 2.8% by Q1 2027.
- ECB considers 3% wage growth consistent with its 2% inflation target.
- Euro zone inflation is not spreading or broadening as fast as it did in 2022, according to ECB Governing Council member Álvaro Santos Pereira.
- Pereira is closely monitoring developments, especially the recent surge in gas prices.
The European Central Bank's updated wage tracker suggests a modest increase in negotiated pay growth in the first half of 2027, following steady increases throughout 2026. The tracker indicates projected negotiated wage growth of 2.6% to 2.7% through the end of the first quarter of 2027, with a subsequent pick-up to 2.8%. The ECB closely monitors wage developments to assess whether recent inflation surges are leading to excessive pay demands. However, the bank has consistently argued that wage growth figures around 3% are compatible with its 2% inflation target. The latest data release, dated July 29, 2026, extends the forward-looking horizon of the wage tracker to March 2027, with further extensions planned as more agreements are signed. The tracker with smoothed one-off payments indicates 2.3% growth in 2026 and 2.7% in the first quarter of 2027, while the version with unsmoothed one-off payments shows 2.6% for 2026 and 2.7% for the first quarter of 2027.
ECB Governing Council member Álvaro Santos Pereira stated that inflation is not spreading or broadening as fast as it did in 2022, but policymakers are keeping a close eye on developments, especially in light of the recent surge in gas prices. He added that the AI boom and its impact on global growth and inflation is another 'shock' central bankers are grappling with. The ECB raised euro zone interest rates last week for the second time this year, and financial markets are pricing at least three more hikes over the next 12 months.