ECB/Knot: 7% Wage Demands Incompatible with 2% Inflation Target

Forex - Klaus Knot, a member of the European Central Bank and President of the Dutch Central Bank, stated that the 7% wage demands are inconsistent with the 2% inflation target. This issue, highlighted in the latest ECB Economic Bulletin, raises concerns as it could impact both the public and private sectors and contribute to persistent inflationary pressures in the Euro area.

Knot noted, "The discrepancy between wage demands and the inflation target is not limited to the public sector. Private sector wages are also rising, with some forecasts indicating a 7% increase. This development, combined with the ongoing recovery in the labor market and high energy and food prices, heightens concerns about persistent inflationary pressures in the Euro area."

He emphasized that the ECB's response to this situation will be crucial in determining the future trajectory of inflation in the region, highlighting the expectation that the ECB will closely monitor wage developments in both the public and private sectors and adjust its monetary policy stance as necessary to ensure inflation remains on a sustainable path towards the 2% target.