Eurozone wage growth may accelerate next year; ECB wary of energy shock passing through to wages

According to information from Zhihu Finance APP, the European Central Bank stated that wage growth in the eurozone may accelerate in 2027 but will still remain far below past highs. The Bank is assessing inflation risks arising from the Iran war. The wage tracker released by the ECB on Wednesday forecasts annual wage growth of 2.7% for the first quarter of next year and 2.8% for the second quarter. This is stronger than the second half of 2026 but still well below the peak of 5.2% in 2024.

"The lower wage tracker reading in the first half of 2026 reflects the mechanical downward impact of one-off payments made initially in the second half of 2024 and not repeated the following year," the ECB said in a statement. "These effects will fully dissipate in the second half of 2026."

Policymakers are evaluating how high energy costs are being transmitted to other prices through channels such as wages. Last week, they implemented the second interest rate increase since June, and markets expect further hikes in order to bring inflation down from above 3% to the 2% target level.

After this month's policy meeting, the ECB emphasized that wages "at this stage have not shown a substantial reaction to the energy shock." However, the Bank warned that the shock could still intensify, with disruptions to prices and wages exceeding current expectations.

Data from last week showed that employee average remuneration grew 3.3% in the second quarter, down from 3.5% in the first quarter.

Although some officials believe such developments help alleviate concerns about second-round effects, others say that the ECB cannot wait for these results to materialize, as waiting until then to act could be too late.