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Euro-Area Wage Growth Signals ECB's Inflation Goal in Sight

Euro-Area Wage Growth Signals ECB's Inflation Goal in Sight

Workers in the euro area are seeing the strongest pay gains in a decade, a rare piece of positive economic news for the European Central Bank as it heads toward scaling back extraordinary stimulus.

Compensation per employee in the euro area grew an annual 2.5 percent in the third quarter, according to Eurostat data published on the ECB’s website Friday. With the institution’s chief economist Peter Praet having recently flagged a timeframe of six to 12 months for wage growth to feed through to inflation, policy makers can expect to make progress on reaching their goal.

Wage Growth At Last

Higher compensation in the euro area bodes promising for inflation

Source: ECB Statistical Data Warehouse

“The strong number will be an important ingredient in the ECB’s inflation confidence story and sets the scene for a continued hawkish tone on wages at next week’s meeting,” said Danske Bank analyst Aila Mihr.

While inflation has hovered around 2 percent since May, underlying price pressures continue to be weak. The ECB will publish new projections on Thursday.