Graphic content – June; the ECB continues to be too optimistic

Jack Norris
Written by

14th June 2017

The European Central Bank (ECB) recently lowered its headline inflation forecasts, with the latest figures now at 1.5% for 2017, and 1.3% for 2018. While the revision was based predominantly on weaker expected growth in energy prices, this forecast still remains below the ECB’s target of close to 2%.

The Eurozone’s core inflation rate has been hovering around a mere 0.9% for the last two years. Behind this is the fact that wage growth in the Eurozone has been persistently weak. As the chart below demonstrates, the ECB has consistently overestimated the future path of wage growth in Europe over the last four years.

Weak wage growth is not just a European phenomenon, however. The US and UK are also experiencing sluggish earnings growth. Indeed, wage growth is constrained there despite tighter labour markets. Europe has more spare capacity, and hence we should expect lower relative wage growth in the region. Nevertheless it appears that, globally, policymakers have failed to recognise a structural development in labour markets that has taken place over the last decade.


Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors might not get back the full amount invested.

Past performance is not a reliable indicator of future results. If the currency in which the past performance is displayed differs from the currency of the country in which the investor resides, then the investor should be aware that due to the exchange rate fluctuations the performance shown may be higher or lower if converted into the investor’s local currency. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable, but it has not been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or wilful misconduct. The conditions of any underlying offer or contract that may have been, or will be, made or concluded, shall prevail.

This is a marketing communication issued by Allianz Global Investors GmbH,, an investment company with limited liability, incorporated in Germany, with its registered office at Bockenheimer Landstrasse 42-44, 60323 Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht ( This communication has not been prepared in accordance with legal requirements designed to ensure the impartiality of investment (strategy) recommendations and is not subject to any prohibition on dealing before publication of such recommendations. The information contained herein is confidential. The duplication, publication, or transmission of the contents, irrespective of the form, is not permitted.