ECB: Lagarde Comments On Negotiated Wages Contributes To Post-Meeting Sentiment

In yesterday’s press conference, President Lagarde noted that negotiated wage growth will remain elevated “in the first half of 2025, but then it is definitely on a declining path”. Previous press conferences had pointed to 2024 as a year with elevated/volatile negotiated wage growth, which would then decline from 2025 onwards. In other words, the onset of a sustained moderation in negotiated wage growth was pushed back a little. 

• We don’t think this statement was intended to be hawkish for 2025/2026 policy expectations though. It could even be interpreted as Lagarde preparing markets for an elevated negotiated wages outcome in Q1/Q2 2025, but not painting such a development as a major cause for concern.
• Nevertheless, the remarks likely added to post-meeting sentiment, whereby expectations for an October cut were reduced.
• Although a move in October was not explicitly ruled out by Lagarde, she admitted that the meeting was “a relatively short period of time compared with other intervals that we’ve had in the past”.
• That means there will be relatively little data to feed into the ECB’s “data-dependent and meeting-by-meeting approach”.
• Source reporting after the decision confirmed that an October cut was unlikely (echoing the MNI Policy Team’s reporting heading into the meeting).
• There remains some speculation that a dovish Fed decision (i.e. a 50bp cut) could tempt the ECB into an October cut, but we think both outcomes remain unlikely.