The European Central Bank and fears of continuing high inflation (AFP)
The head of the economics department at the European Central Bank saw that the wage increase will continue to fuel inflation In the eurozone, even following the shocks of the Covid-19 epidemic and the Russian invasion of Ukraine have passed.
And Philip Lane wrote in an electronic blog, published on the European Central Bank’s website today, Friday, that “even following the factors associated withenergy and the epidemicThat causes the inflationary trend, the “wage increase will be the main driver forRising prices during the coming years.”
And with inflation crossing the 10% threshold during the fall in the region, the European Central Bank fears entering into a spiral of interconnected increase in wages and prices, which may fail its expectations of a gradual return to inflation to the target it set at 2%.
However, Lane stressed that this phenomenon is not currently in the process of being verified, as the recent negotiations have generally led to an average increase in wages of 3.8% for the year 2022 and 3.5% for the year 2023.
In Germany, regarding four million employees in the industrial sector, in electronics and mining, received a wage increase of 8.5% over two years on Friday.
Of course, these increases are considered “above the normal level,” but they reflect “in large part the compensation mechanism, following the decline in real wages recorded since mid-2021,” when the increase in energy and raw materials prices led to a sharp rise in inflation in the world and a decline in purchasing power.
Lane believed that prices will continue to rise in the future, but this should not be interpreted as a “permanent change in the dynamic of basic wages.”
He concluded that following the stage of compensating for the decline in wages is passed, “we can expect basic wages to grow at a pace equal to the sum of labor productivity growth and the inflation target of 2%.
The words of the Irish economist, which are usually expected by analysts, as they shed a lot of light on the directions of the European Central Bank, come only one day following the statements of the vice president of the bank, in which he indicated his expectation that inflation in the euro zone has already reached its peak, or almost.
Luis de Guindos, vice president of the European Central Bank, said on Thursday that inflation in the euro area will hover around its current levels in the next few months, before starting to decline in the first half of 2023.
He added, during his participation in an economic conference in Milan, Italy, that inflation is likely to have reached its peak or close to it anyway.
“For core (inflation) … I think we’ve hit it in terms of a peak, maybe one decimal point up or down, it’s going to hover, but I think we’re going to see a dip during the first half of next year,” he said.
(AFP, The New Arab)
