Price-wages: the chase is on

by time news
In Germany, the IG Metall union mobilized its members to demand an 8% wage increase. Its representatives obtained 8.5% spread over 2023 and 2024. TIMM REICHERT/REUTERS

Wage claims could take over the energy in soaring inflation.

What if, once the surge in energy prices subsided, wages took over to install inflation in a lasting way in the landscape? This is the black scenario on which the central bankers have their eyes riveted. The specter of a price-wage spiral – increases in the former encouraging demands for increases in the latter, which, in turn, risk pushing companies to raise prices again. If this “loop” is not yet in place in Europe, wage catch-up seems inevitable, in order to restore the purchasing power lost with inflation at 10.6% on average in the euro zone last month. “The risks of ‘second round’ effects on wages have increased”, confirm HSBC economists in a study.

The chief economist of the European Central Bank (ECB) addressed the issue in a very detailed blog published Friday on the institution’s website. According to Philip Lane, a salary catch-up that is out of step with…

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