Spare capacity in labour market mutes wage pressures

We now expect the euro-zone economy to grow more quickly this year than the consensus or the ECB expects. Inflation too will be higher than others are forecasting as supply shortages persist into the second half of the year. But with plenty of spare capacity in the region’s labour market, there is little chance of a wage-price spiral that would trouble the ECB. Indeed, we expect the Bank next week to reiterate its commitment to “forceful” and “persistent” policy accommodation.