Eurozone firms anticipate slower wage and price increases

A recent survey conducted by the European Central Bank has revealed that companies in the Eurozone expect a slowdown in wage growth and a moderate increase in selling prices in the upcoming period. The results indicate that the recent wave of inflation, driven by rising energy costs, has not yet led to a wage-price spiral, as inflation remains close to 3%, which is above the bank’s 2% target. The survey forecasted a decline in the expectation of selling price increases to 3.2% for the next year, and a decrease in input cost expectations unrelated to labor to 5.2%, along with a reduction in wage growth projections to 2.5%. Although inflation expectations in the short and medium term remain steady at 3%, the five-year outlook has risen to 3.1%. These findings are significant for policymakers ahead of their upcoming meeting, where interest rates are expected to be maintained, with a potential increase in the deposit rate to 2.25% by September due to ongoing rises in oil prices.

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