However, annual inflation for HICP excluding food and energy remained unchanged (at 0.8%). This is a cause of concern since core inflation, depending on domestic factors, is not recovering which may affect the dynamics of headline inflation going forward, affecting our monetary policy. A more satisfactory evolution of wages is needed, now that inflation and productivity are increasing.
Wages are a crucial driver of prices in a service-dominated economy. In countries with large external surpluses, wage-dynamics should finally start showing more favourable developments.