The European Central Bank is increasingly confident that wage growth is slowing back toward more normal levels, potentially opening the door to rate cuts, ECB chief economist Philip Lane said in a podcast published today.
The ECB has long pointed to rapid wage growth as a source of concern and said that cutting rates from record highs becomes possible once data starts showing the long-forecast moderation in wage demands.
"It's desirable and inescapable that we do have several years of wage increases above a normal level," Professor Lane said."But what we need to make sure it returns to normal."Professor Lane said that once the ECB becomes more confident that wage growth is slowing and inflation is indeed heading back to the 2% target as projected, it can start discussing rate cuts.
"If this assessment is confirmed, then we will start looking more closely at reversing some of the rate increases we've made," he said. Markets now see 90 basis points of rate cuts this year with the first move expected either in June or July.
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