Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Bundesbank warns of inflation risk as wages rise more than expected

Published 05/22/2024, 06:01 AM
Updated 05/22/2024, 06:17 AM
© Reuters

FRANKFURT (Reuters) - Wages in Germany have been rising faster than expected, casting some doubt on expectations for a continued fall in inflation, the country's central bank said Wednesday.

The European Central Bank is all but certain to begin lowering interest rates next month, with President Christine Lagarde saying on Tuesday she was "really confident" inflation was now "under control".

But the ECB's biggest shareholder, Germany's Bundesbank, struck a more cautious tone on Wednesday, warning of inflation risks from higher wages as Europe's largest economy recovers.

"There are still risks to the fundamental disinflation process," the Bundesbank said in its monthly report. "Wage growth has recently been stronger than expected. This could mean that the still high price pressure on services in particular could last longer."

It said collectively agreed earnings, including fringe benefits, rose by 6.2% year-on-year in the first quarter of the year, compared to 3.6% in the last three months of 2023.

Excluding one-off payments, collectively agreed wages increased by 3.0% annually in the last quarter, also faster than three months earlier.

"This extends the upward trend in real earnings since spring 2021, which has been quite high in a long-term context," the Bundesbank added.

© Reuters. FILE PHOTO: People walk past the luxury department store Alsterhaus in Hamburg, Germany January 29, 2024. REUTERS/Fabian Bimmer/File Photo

The Bundesbank expects German inflation to rise in May from April's 2.4% and hover at slightly higher level in the coming months, mainly due to an unfavourable comparison to last year, when train ticket prices had been slashed and fuel costs had fallen.

It also sees Europe's largest economy continuing to recover in the second quarter of the year thanks to a rebound in services.

 

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.