Data released by the European Central Bank showed that in the second quarter, eurozone negotiated wage growth slowed to 3.55% from 4.74% in the first quarter. The main reason for this change was a significant slowdown in growth in Germany, the bloc's largest economy. The ECB has long pointed to negotiated wage growth as a key factor in policy discussions and argues that a slowdown in growth in the coming quarters could accelerate monetary policy easing.
Overall, today's data increased the likelihood of another interest rate cut at the ECB's September meeting after the Central Bank maintained the status quo at its last meeting in July. Market pricing reflects a more than 90% probability of easing the ECB's monetary policy in September and indicates at least one more rate cut before the end of the year amid easing price pressures.
Although wage growth in Germany is likely to be unsustainable and may accelerate again, some economists and politicians argue that it has peaked. And despite the fact that wage growth remains above the ECB's target level, policymakers note that already-concluded wage deals lock in a further slowdown in the quarters ahead.
According to final data released by Eurostat earlier this week, consumer price growth accelerated last month, confirming experts' forecasts and preliminary estimates. Meanwhile, core inflation stabilized in July. According to the report, the consumer price index rose by 2.6% per year, as expected, after an increase of 2.5% per year in June. European Union annual inflation was 2.8% in July, up from 2.6% in June. The core consumer price index - excluding energy, food, alcohol and tobacco - rose by 2.9% per year, as expected, after a similar increase in June.