Negotiated wages in the euro area rose 2.44% year over year in the second quarter of 2026, down from a revised 2.56% in the previous quarter and far below the 5.55% peak recorded in 2024. The moderation supports European Central Bank President Christine Lagarde’s assessment that wage trends remain moderate, with limited evidence of second-round inflation effects. However, euro-area inflation accelerated to 2.9% in July, above the ECB’s 2% target, while stronger-than-expected economic growth and higher energy costs linked to the Iran war have increased pressure on policymakers after June’s quarter-point rate hike. Most investors and economists expect another move next month. The ECB’s wage tracker points to a gradual acceleration in pay growth through early 2027, although rates are expected to remain below the peaks of the previous inflation surge. Earlier data showed Q1 wage growth at 2.46% year over year, compared with 2.89% in Q4 2025, while Germany’s negotiated wages rose 2.4% in May, down from 2.6% in April. German inflation and labor negotiations remain important indicators of whether elevated energy costs will eventually produce stronger wage demands.