2/3  BIS central bankers' speeches  Furthermore, the process of setting wages is to some extent backward-looking in a number of euro area countries, reflecting formal and informal indexation mechanisms.3 Additionally, the timing of wage negotiations plays a role.
Wage negotiations often have a multi-year horizon; given that headline inflation remained below 1% for 38 consecutive months until December of last year, it is going to take some time for an increase in headline inflation to translate into second-round effects on broader inflation.