Philip Lane, chief economist at the European Central Bank, said wage growth in the euro area was returning to more normal levels.
“Several years of above-normal wage growth is both desirable and inevitable,” Lane said on the ECB's podcast. “But what we need to make sure is that it basically returns to normal. It's a process of normalization. And this is where we're looking at this and that I can say that I am confident that we are on track,” he said.
Mr Lane also said there was “good progress” towards curbing inflation.
“Inflation should stabilize around the 2% target next year and the year after,” he said. “This is a good baseline. And essentially what we decided is that we need to keep checking this assessment for several weeks after that meeting.
Lane added:
Meanwhile, traders are betting that the Bank of England could beat its European and US counterparts in cutting interest rates, reversing expectations that it would be a laggard in 2024. The stakes are high. The probability of a rate cut is 20%, compared to less than 10% for the US Federal Reserve and the ECB.
This follows Governor Andrew Bailey's comments last week that a rate cut would be considered at a future meeting as inflation risks eased.
That's a major change in market positioning. Britain was expected to lag behind other countries, with inflation remaining high last year despite the fastest inflation cycle in decades.
In early 2024, money markets supported two rate cuts by the Fed and ECB by their third meeting this year, but only one by the Bank of England.
