The European Central Bank (ECB) is anticipating a significant slowdown in euro-zone wage growth by the third quarter of 2027, a development that could provide some relief in its ongoing battle against inflation fueled by the Iran war.
According to the ECB’s wage tracker, released on Wednesday, salaries are expected to rise by just 2.4% annually between July and September next year. This marks a notable decline from the 2.8% forecast for the first and second quarters of 2027. The projected slowdown is even more pronounced when compared to the 5.3% peak wage growth seen in 2024.
The ECB’s wage tracker serves as a key indicator for policymakers as they navigate the complex economic landscape shaped by geopolitical tensions and inflationary pressures. The anticipated deceleration in wage growth could signal a cooling of labor market-driven inflation, potentially giving the ECB more room to maneuver in its monetary policy decisions.