ECB: Wage Tracker Still Points To Declining Pay Pressures Through '26

The ECB’s forward looking wage tracker continues to suggest that negotiated wage pressures will ease through 2026, albeit at a slower pace than expected in October.  The tracker now includes Q4 2026, albeit with a low employee coverage ratio of just 23%. Negotiated wages excluding one-off payments are expected at 2.8% in Q1 ’26, 2.6% in Q2 and 2.5% in Q3, before rising to 2.7% in Q4.

• Stronger-than-expected compensation pressures were a key factor behind the upward revision to the ECB’s services and core inflation projections. The higher-than-expected compensation per employee figure was due to “payments over and above negotiated wages”. That suggests the negotiated wage tracker shouldn’t be considered a perfect forward-looking indicator of actual future pay pressures. However, it is still an important input into the Governing Council’s thinking.
• The ECB writes that “The headline ECB wage tracker is better suited to describing quarterly or monthly dynamics in negotiated wages as it smoothens one-off payments over time. Meanwhile, the ECB wage tracker with unsmoothed one-off payments is better suited to describing yearly dynamics, ensuring that one-off payments are not smoothed twice when constructing the yearly outcomes.”
• Additionally, “Since the previous data release in November 2025, the ECB wage tracker has been expanded to retroactively include collective agreements in Finland from January 2015 onwards. The forward-looking horizon has been extended to the end of December 2026, providing some initial insights for the full year.”