ECB: New Wage Tracker to Contribute to Inflation Assessment

9 February 2024

By Isabel Teles – FRANKFURT (Econostream) – A new forward-looking wage tracker for the euro area provided data that could be used as an additional resource to understand the inflation trajectory, according to an occasional paper published Friday by the European Central Bank.

‘Given the role of wages as a fundamental determinant of inflation, one of the key elements in the pursuit of the ultimate monetary policy goal of price stability is a sound and comprehensive analysis of wage pressures’, the ECB said.

The ECB’s new wage tracker used data from collective bargaining agreements in Austria, France, Germany, Greece, Italy, Spain and the Netherlands, as ‘[n]egotiated wage growth is the most important driver of compensation per employee growth in the euro area, so it is a vital ingredient in forecasting developments in wage pressures’, the paper said.

Wage negotiations during the first quarter of 2024 would be decisive for wage developments and needed to be closely monitored, the ECB said.

‘As a large share of contracts will run out and is due for renegotiation over the first quarter of 2024, the wage growth agreed in these renegotiations can be expected to have a decisive impact on the development of wage pressures in 2024’, the paper said.

‘This reflects the importance of a detailed monitoring of wage negotiations over the first months of 2024.’

According to the ECB, the wage tracker and the indicators of negotiated wage growth had been aligned.

‘This implies that coverage of the forward-looking wage tracker is large enough to give important and reliable signals about current and future wage developments in the euro area’, the paper said.