ECB Chief Economist Philip Lane, speaking in Italy today, expressed optimism that wage growth will normalize by 2025, based on surveys and forward-looking indicators among companies.
“The reason why we think inflation will come down next year is that this is the last year of high wages,” Lane said. He highlighted that wage increases, which were around five or six percent last year, are now projected to be around three to four percent.
Lane also emphasized ECB’s focus on domestic inflation, explaining, “What we can mostly influence is domestic inflation because the ability of European firms to raise prices depends on monetary conditions.” He acknowledged that while domestic inflation has decreased from its peak a year ago, it remains around 4%, which continues to be a concern.
