The ECB’s proprietary wage tracker, updated through May, holds steady at a projected 2.6% for the end of 2026. This marks a cooling trend from the 3.2% growth recorded last year. When accounting for unsmoothed one-off payments, the data reinforces this downward trajectory, aligning with the central bank’s long-standing assessment that wage growth between 2% and 3% remains compatible with their 2% inflation target.

This shift in momentum could temper the urgency behind further interest rate hikes. Following a benchmark rate increase to 2.25% last week, officials are currently evaluating the necessity of additional measures in July. While market participants have priced in one to two more hikes over the coming year, this latest evidence suggests the inflationary pressure on wages is not accelerating as some analysts previously feared.