1y ago

Slower wage growth needed for euro zone rate cuts, ECB's Knot says

www.reuters.com /markets/europe/slower-wage-growth-needed-euro-zone-rate-cuts-ecbs-knot-says-2024-01-28/

The European Central Bank (ECB) will need to see proof of slowing wage growth in the euro zone before interest rates can be lowered, ECB governing council member Klaas Knot said on Sunday.

"We now have a credible prospect that inflation will return to 2% in 2025. The only piece that's missing is the conviction that wage growth will adapt to that lower inflation", the Dutch central bank governor said in an interview with Dutch TV program Buitenhof.

"As soon as that piece of the puzzle falls in place, we will be able to lower interest rates a bit."

21 comments

God forbid workers get a bigger share of the pie.
- Yeah because ever increasing wages and thus money in circulation fixes inflation.
  Workers don't win if inflation stays high.
  
  Which would be true if wages hadn't been stagnant for decades while corporate profits rose.
  That's the difference here.
  
  Wage growth does not imply higher inflation. For one, employers don't print money, so the money in circulation does not necessarily increase as you claim. For another, prices are not determined by money in circulation; they are determined by costs. Plenty of things get cheaper to create over time.
  The current spate of inflation has been driven primarily by corporate profits and supply chain issues.
  Even if wage growth were to cause inflation, it would still mean workers would be getting a bigger slice of the pie, and they would do better relative to owners.
  
  If that worker has a lot of debt and a fixed rate mortgage...
Pfft. What a load of horseshit, especially when you consider the ECB itself reported corporate profits have consistently risen in 2023. Source

21 comments