This week we published an inflation watch for the Eurozone, in which we see data favoring an overall disinflationary picture. However, we also noted some drivers were painting a more sticky inflation picture such as businesse’s reluctance to give up their margins and wage pressures from workers. This week Germany’s biggest public union Verdi reached an agreement with the government to be voted through by its members and we wanted to look at the consequences of said deal for the German wage indices.  

Chart 1: Higher wages support higher prices