ECB wage tracker shows muted pay pressure despite war inflation

FRANKFURT, June 17 (Reuters) - ‌Euro zone negotiated ​wage ​growth appears to be slowing as predicted, European Central Bank data showed on Wednesday, ‌offering policymakers relief that the Iran-war-induced inflation surge ⁠has not set off a fresh round of pay demands.

The ECB ‌fears workers will demand ‌compensation for rapid inflation, much like in 2022, triggering a self-reinforcing cycle that can only be tamed ​through higher borrowing costs.

However, the ECB's own wage tracker, which includes data up to the end of ⁠May, was unrevised and indicates negotiated wage growth at around 2.6% by ​end-2026, below the 3.2% last year.

The data series with unsmoothed one-off payments shows wage growth ​for the whole of 2026 ‌at 2.6%, down from 3% a year earlier, said the ECB, which has long ⁠argued that wage growth between 2% and 3% is consistent with its 2% inflation target.

Though just one piece in the ⁠inflation puzzle, the data may take pressure off policymakers to quickly ​raise rates again.

The ECB lifted its benchmark rate to 2.25% last week after inflation exceeded 3%, mostly to prevent expectations from ‌rising, and policymakers are now debating whether a follow-up move in July is ‌needed.

Markets expect between one and two more rate hikes ⁠over the coming year ‌and the next move ​is fully priced in by October.

(Reporting by Balazs Koranyi; Editing by Alex Richardson and Alexander ‌Smith)

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