The ECB expects the reward to become “slightly more” this year, although it admits the increases are “moderate” for now
European Central Bank (ECB) President Christine Lagarde warned on Monday that, in addition to energy, price hikes are rife in the eurozone across all sectors. He pointed out that wage growth “started to pick up” and is expected to pick up further during the year, supported by labor shortages, the increase in minimum wages and the offsetting effects of high unemployment rates.
“Wage growth has started to pick up, but remains subdued,” the euro-zone central banker said during her appearance this Monday before the European Parliament’s Committee on Economic and Monetary Affairs.
In this regard, Lagarde warned that the central bank expects negotiated wage growth to “be slightly stronger in 2022”. Then, he added, it would remain above average over the projection horizon, “supported by tight labor markets, minimum wage increases and also some offsetting effects from high inflation rates.”
In this way, the evolution is reflected in the rise in longer-term inflation expectations in the euro area, as reflected in the latest projections of the ECB, which revised its forecasts significantly upwards in June.
So these projections now indicate that inflation in the eurozone will remain “undesirably high” for some time to come. Specifically, they expect annual inflation from 6.8% in 2022 and 3.5% in 2023 to reach 2.1% in 2024. “This means headline inflation is expected to be slightly above us at the end of the projection horizon. target,” Lagarde acknowledged.
The European Central Bank’s first rate hike in 11 years will take place on July 21 and will bring the price of money to 0.25%. In September, the second takes place, which can be 50 points, up to 0.75%. And then, depending on how relentless inflation evolves – which closed in May at 8.1% – there will be further increases until the target of around 2% is guaranteed, as per the ECB’s mandate. This policy comes after the FED raised interest rates in the US.
Source: La Verdad
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