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Lane On Wage Dynamics Going Forward

ECB

When asked how he views the role of one-off payments in wage dynamics going forward (given that real wages were very negative in 2022 and the start of 2023), Lane responded (text not verbatim):

"We have not really been surprised by the wage dynamics. Because of multi-year contracts in Europe, the adjustment to higher inflation is played out over several years. The typical wage contract has a catch-up component as well as a forward looking component. Everyone believes that inflation is going to be relatively low, so there isn't an impulse from the forward looking component. However, there, is a range of possibilities by how quickly the drop in real wages will be corrected. This varies across countries."

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