Eurozone wage growth to slow sharply by ’25 – ECB’s Lane

Eurozone wage growth, a significant driver of inflation, is expected to decelerate sharply in 2025 and 2026, according to European Central Bank Chief Economist Philip Lane.

Speaking at a conference in Frankfurt on Thursday, Lane noted that while wage increases remain robust in the latter half of 2024, the peak has likely been reached, with nominal wage growth set to slow considerably over the next two years.

Lane’s remarks come ahead of a crucial ECB meeting where officials will decide whether inflation is easing sufficiently to warrant another interest rate cut.

This decision follows a recent moderation in negotiated wage increases and the expectation of a significant drop in euro-area inflation to 2.2 per cent in August, down from 2.6 per cent in July. Investors are anticipating additional rate cuts this year, with more potentially in 2025, as underlying price pressures show signs of easing.