ING Group: Sluggish Economic Activity Coupled with High Wage Growth Makes ECB More Likely to Further Raise Rates

Bert Colijn, an economist at ING Group, wrote in a report that weakening business activity in the Eurozone coupled with robust wage growth driving inflation higher makes it more likely for the region to face a downturn.

The Eurozone’s PMI contracted again in August, indicating weakening demand, which should help alleviate inflation.

However, Colijn noted that wage cost pressures remain high, pushing up inflation in the services sector, thereby increasing the likelihood of the European Central Bank (ECB) choosing to further raise rates, potentially further hampering the economy.

He stated, “This makes an economic recession a very real downside risk to the economic outlook.”