20.02.202610:32:23UTC+00Eurozone Negotiated Wage Growth Quickens in Q4

Negotiated wages in the Euro Area increased by 2.95% year-on-year in the fourth quarter of 2025, up from a revised 1.89% in the previous quarter. This marks a clear acceleration in pay growth, though it remains well below the 5.4% peak reached in 2024. The rebound in wages supports the European Central Bank’s stance that there is no immediate need for additional interest rate cuts, as current wage trends are still compatible with a gradual easing of inflationary pressures.

After holding its deposit rate at 2% for the fifth consecutive meeting, ECB President Christine Lagarde reiterated that wage developments will be monitored closely, given their influence on services inflation, which continues to run above 3%. The ECB anticipates that inflation will settle around its 2% target as wage growth slows, but it also warns that a more gradual deceleration in wages could represent an upside risk to inflation.

At the same time, policymakers remain cautious about the opposite risk: an overly sharp weakening of pay growth. Euro Area inflation fell to 1.7% in January and is projected to hover around, or slightly below, 2% over the coming years, prompting concerns that an excessive wage slowdown could unduly dampen demand and weigh on the recovery.