The European Central Bank (ECB) is gearing up to enhance transparency by regularly disclosing internal wage metrics used by officials to assess inflation risks while contemplating interest rate adjustments.
According to a spokesperson, the so-called wage trackers, designed for swift data delivery on salaries and often referenced in policymakers’ speeches, will be publicly accessible “later this year.”
This move promises investors a more comprehensive insight into the factors influencing officials’ perception of wage pressures within the economy.
Depending on the timing of the release, this increased transparency could coincide with the commencement or continuation of an ECB interest rate reduction cycle, should market expectations for June materialize.
The ECB, headquartered in Frankfurt, has collaborated with national central banks to develop these metrics, compensating for the lack of consistent and timely data across the region.
Devoid of such measures, policymakers would encounter a deficiency in a critical information category crucial for assessing inflation dynamics, particularly regarding wage and labor cost data, which could signal the risk of accelerated price growth stemming from robust wage increases.
In February, ECB President Christine Lagarde highlighted salaries as “an increasingly important driver of inflation dynamics in the coming quarters.” Following the Governing Council’s decision to maintain the record-high deposit rate of 4%, she reiterated officials’ heightened attention to wages earlier this month.
ECB Chief Economist Philip Lane recently pointed out that the most comprehensive measure derived from national accounts faces a delay of over two months.
As numerous pay negotiations are set for early 2024, updates to the wage trackers will furnish “vital information,” according to Lane.
In an occasional paper last month, ECB staff noted that wage growth in the euro area remains elevated without reaching an inflection point. Lane further remarked last week that salaries are trending positively.
