Wage Increases Negotiated in the Eurozone Accelerated in the Third Quarter

According to the European Central Bank (ECB), the increase in negotiated wages in the Eurozone accelerated in the third quarter. As workers continue to demand compensation for the income losses experienced due to recent inflation, the rise in agreed wages increased from 3.54% in the previous three months to 5.42% in the third quarter.

This figure is not expected to diminish hopes that the ECB will implement a new interest rate cut in December. However, it is likely that policy hawks will use this data to soften market bets suggesting a rate cut in every policy meeting until spring, and that the deposit rate of 3.25% could fall to 2% or possibly lower by 2025.

JPMorgan economist Greg Fuzesi stated, “Our expectation is that the compensatory effects linked to inflation will significantly slow down wage increases in the Eurozone next year. With headline inflation now much lower, once real wages recover sufficiently, nominal wage growth will also taper off to lower levels going forward.”