Economists Claus Vistesen and Melanie Debono from Pantheon Macroeconomics have indicated in a report that the pending decision by the European Central Bank (ECB) in September regarding a potential interest rate hike remains uncertain, but the onus of proof now rests with the hawks.
The steady year-on-year wage growth of 4.3% in the Eurozone during the second quarter, following negotiations, is noted by dovish ECB officials, providing them with grounds to argue against a premature tightening.
Conversely, economists argue that the hawks would view this figure as still being elevated. The PMI data for August, released on Wednesday, supports both perspectives.
Dovish officials assert that economic activity is witnessing a sharp decline, while the hawks contend that the accelerated wage growth in the services sector is indicative of the second-round effects of inflation.
In essence, even though the European Central Bank has not yet reached the culmination of its tightening cycle, it is already remarkably close.
