Wage growth in the eurozone has decelerated, potentially opening the door for the European Central Bank (ECB) to reduce interest rates in the near future. According to recent data, wages negotiated between employers and labor unions rose by 4.12% in the fourth quarter of 2024 compared to the same period the previous year. This marks a slowdown from the 5.42% increase observed in the third quarter.
The moderation in wage growth suggests easing inflationary pressures, which may influence the ECB’s monetary policy decisions. In January 2025, the ECB reduced its key interest rate by a quarter point to 2.75%, aiming to support the stagnant eurozone economy.
Bundesbank President Joachim Nagel indicated that the ECB could continue to lower interest rates as inflation approaches the target level.
The combination of slowing wage growth and moderated inflation expectations provides the ECB with greater flexibility to adjust monetary policy in support of economic growth.
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