Eurozone wage growth to remain around 2% next year, ECB says

[BRUSSELS] Pay growth in the euro area will hover near 2 per cent in the first nine months of next year, supporting the European Central Bank’s assessment that inflation is in check.

The ECB’s wage tracker, published on Wednesday, predicts salaries will rise by an annual 2.2 per cent in the third quarter of 2026 after advancing 1.8 per cent in the second – far below the peak of 5.3 per cent recorded at the end of 2024.

“Forward-looking information continues to indicate easing of negotiated wage growth,” the ECB said in a statement. “Preliminary data for first three quarters of 2026 suggest lower and more stable wage growth.”

The figures follow last week’s decision by the ECB to keep interest rates unchanged for a third meeting, with President Christine Lagarde repeating that she and her colleagues are “in a good place.” With inflation hovering around the 2 per cent target and the economy growing, most officials aren’t inclined to ease monetary policy further.

Lagarde highlighted wage developments as one area the ECB is “attentive” to, given their impact on services and underlying inflation. Price pressures in the services sector quickened to 3.4 per cent in October. That contributed to the core gauge, excluding volatile energy and food, unexpectedly holding at 2.4 per cent. The headline number eased to 2.1 per cent.

Citing factors including elevated core inflation, governing council member Peter Kazimir said this week that “letting one’s guard down wouldn’t be advisable at this stage,” adding that a measure of employee compensation “came in somewhat stronger than expected.”

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The ECB’s September projections envisage nominal wage growth continuing to moderate in 2026 as wage pressure fades. BLOOMBERG