ECB forecasts slower wage growth in Europe in 2025

According to the European Central Bank's (ECB) forecast, wage growth in the region is expected to slow in 2025, indicating an easing of inflationary pressures. This will give the regulator more opportunities to loosen monetary policy. In March, the ECB rate was cut for the sixth time since last June, as Bloomberg reports.

In the 4th quarter of 2025, wages in Europe are expected to grow by 1.5%. This is lower than last year's actual value of 5.3%. However, the agency's experts attribute last year’s record growth to large one-off payments and the front-loaded nature of labor cost increases in several industries.

At the same time, recent changes in European fiscal policy may prompt the ECB to refrain from further rate cuts. The region intends to increase defense spending and infrastructure investments. With this background, market participants are beginning to scale back their expectations for the extent of rate cuts in the EU this year. The current deposit rate is at 2.5%, as Bloomberg reports.

Despite these challenges, the positive trend in wage growth has bolstered European officials' confidence in achieving the 2% inflation target by early 2026.