The European Central Bank's (ECB) wage tracker is projected to reach its peak at approximately 5.4% by the end of 2024 before tapering to an average of 3.2% in 2025. This anticipated easing comes as the Eurozone navigates through a complex economic landscape shaped by recent inflationary pressures and pandemic-related disruptions. Meanwhile, the unsmoothed one-off payments tracker, which currently averages 4.8% in 2024, is expected to decline to 2.7% in 2025, signaling a shift towards more stable wage dynamics.
Historically, wage growth indicators were mild until 2019, with negotiated wage pressures remaining subdued due to the economic shutdowns and job retention schemes during the pandemic years of 2020 and 2021. However, the surge in inflation in 2022 prompted companies to increase one-off payments to mitigate the effects of rising costs on employees. This, in turn, contributed to a gradual rise in overall wage growth across the region.
The ECB has recently adjusted its policy rates, reducing them by 25 basis points and bringing the Deposit Facility Rate to 2.75%. This move reflects the bank's assessment that the disinflationary process is well underway. Analysts are optimistic about the Eurozone's economic outlook, forecasting an annualized growth rate of 2.6%. Concurrently, long-term yields have been on a downward trend across the region, with Romania experiencing a notable decline of approximately 40 basis points in its 10-year paper yields since early this week.
In currency markets, the EUR/USD pair has maintained a bearish trend around the 1.0400 region following the ECB's interest rate decision. The central bank has underscored its commitment to supporting economic activity within the Eurozone, prioritizing measures that bolster growth in the common bloc.
Reliable data sources have informed these insights into wage and economic trends. However, Erste Bank Sparkassen (CR) and its affiliates do not assume responsibility for the accuracy or completeness of the information provided.