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MNI BRIEF: Pay Rises Must Not Mean Price Surge - CBI's Donnery

(MNI) LONDON
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Ireland’s tight labour market is putting upward pressure on wages and, potentially, inflation, Central Bank of Ireland deputy governor Sharon Donnery said in a speech Thursday. Pay packets are expected to grow by 5-6% over the next two years -- compared with 4-5% in the euro area as a whole -- which could make it harder for the ECB to reach it’s 2% inflation target.

“This does not mean we do not expect wages to adjust to high rates of inflation – so-called ‘second round’ effects. But we want to avoid a situation whereby third and fourth round effects contribute to self-perpetuating wage-price dynamics," she said.

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Ireland’s tight labour market is putting upward pressure on wages and, potentially, inflation, Central Bank of Ireland deputy governor Sharon Donnery said in a speech Thursday. Pay packets are expected to grow by 5-6% over the next two years -- compared with 4-5% in the euro area as a whole -- which could make it harder for the ECB to reach it’s 2% inflation target.

“This does not mean we do not expect wages to adjust to high rates of inflation – so-called ‘second round’ effects. But we want to avoid a situation whereby third and fourth round effects contribute to self-perpetuating wage-price dynamics," she said.

Keep reading...Show less