Wage growth was subdued in 2016, but the recent decline in the euro-zone unemployment rate to an 87-month low, taken in isolation, points to a strong pick-up from here. On the face of it, that suggests that the ECB’s plans to buy assets throughout 2017 may not be warranted. However, there are a number of reasons to expect wage growth to rise only gradually, including that there is probably more slack in the labour market than the unemployment rate suggests. So even by 2018 core inflation is unlikely to have increased strongly. The upshot is that there is little chance that the ECB will renege on its commitment to purchase assets throughout this year and probably beyond.
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