ECB Downplays Wage Pressures Amid High Inflation
The European Central Bank (ECB) is not seeing significant wage pressures in response to this year's energy-driven inflation surge, according to the bank's chief economist Philip Lane. Inflation shot past 3% last month and some economists see it hitting 4% by the end of the year due to rising fuel and gas prices.
Lane attributed the lack of wage pressures to people being aware that the cost of living is increasing more than expected, but also being mindful of competition from other countries like China. He mentioned that many firms are warning employees that asking for too much could lead to the introduction of AI robots.
The surge in energy prices has pushed up market bets for ECB rate hikes, with investors expecting three or four more moves on top of the bank's recent hikes. However, once the risk premium is stripped from market data, the interest rate peak is seen at just above 3% next year, then falling by the end of 2027.