Christina Lagarde has so far refused to give a timeline for ECB rate cuts in 2024. Instead, she makes clear that wage data will be “critically important” in deciding when to loosen monetary policy in the EU.

In other words, if you want to understand ECB rate-hikes, you have to understand wage developments in Europe. The guiding star of the ECB council said earlier today that “persistently low, and recently even negative, productivity growth exacerbates the effects that the current strong growth in nominal wages has on unit labour costs for firms,” and that “.. this increases the risk that firms may pass higher wage costs on to consumers, which could delay inflation returning to our 2% target.”

It seems like the ECB needs to see progress on wages despite HICP consumer inflation surprising on the very low side of their expectations.

Table 1: Wage growth across the Euro area