ECB: QE could be extended again if wage growth does not pick up – Danske Bank

Research Team at Danske Bank, suggests that the ECB follows developments in wages closely.

Key Quotes

“ECB’s wage forecast is hopeful QE could be extended again if wage growth does not pick up The ECB’s expectations of higher core inflation are based on higher service price inflation, which is linked to stronger wage growth. Related to this, the ECB considers it ‘important to continue to follow developments in wages closely’.

Some ECB members have noted that analysis of the inflation outlook using a range of Phillips curves suggested that the projections could be considered optimistic.

In our view, wage growth will not pick up as fast as the ECB expects implying core inflation to undershoot the ECB’s projection. Based on this, we see a risk that the ECB will end up extending its QE purchases beyond September 2017.”