Eurozone Wage Growth to Peak Early in 2024, Path Further Ahead Unclear

• Eurozone wage growth is likely to peak early this year, but the path further ahead remains uncertain, a new forecasting tool developed by the European Central Bank showed on Friday.
• The ECB has singled out wages as the most important variable in determining whether it can start cutting interest rates and call time in the fight against high inflation.
• Its new wage tracker, detailed for the first time in a paper published on Friday, showed growth in compensation hitting a peak at around 5% early this year.
• However, the jury was still out on whether and how quickly pay rises would fall back towards the 3% level the ECB considers compatible with its 2% inflation goal. "Negotiations over the first quarter of 2024 are likely to be decisive for the development of wage pressures over 2024," the authors of the paper wrote.

(Source: Reuters)