ECB survey predicts moderation in inflation and rising wage expectations

FRANKFURT, March 7 (Reuters) – Euro zone consumer inflation expectations fell in January but wage growth expectations continued to rise, raising fears that wage growth could dampen control efforts prices, a survey by the European Central Bank revealed on Tuesday.

Headline inflation is now declining relatively rapidly, but underlying price pressures continue to build, partly driven by rapid nominal wage growth in services, suggesting that price growth could remain much longer. tenacious than what the ECB now expects.

Inflation expectations for the next 12 months fell to 4.9% from 5.0% the previous month, while three-year expectations fell more sharply from 3% to 2.5%, according to the median estimate of about 14,000 consumers from six of the country’s largest economies. the euro zone.

On average, households expect their nominal income to grow by 1.3% over the next 12 months, a modest increase given strong price growth, but still above the 1% observed in the survey. December.

ECB policymakers forecast nominal wage growth of around 5% this year, the fastest in years, and a possible headache when setting interest rates.

Although wages are recovering after a sharp fall in real incomes, the 5% rate is still incompatible with a drop in inflation to 2%, so the recovery itself should prolong inflation and make it more difficult for the ECB the achievement of your objective.

The bank has raised rates by 300 basis points since July and promised another 50 basis points in March. Markets expect gains of more than 100 basis points in upcoming meetings before the deposit rate stabilizes at 4% or just above.

(Reporting by Balazs Koranyi; Editing by Angus MacSwan)