True, a recent Bundesbank study finds that the cyclical impact of wages on prices in Germany has become weaker since the 1970s. In recent years, however, the pass-through has remained roughly stable and intact. [15] Our economists estimate that a 1% rise in wage costs in Germany increases consumer prices by around 0.3%.
But the analysis also shows that the transmission can take several years. With that in mind, the slow strengthening of inflation shouldn’t really come as a surprise to us. An ECB study suggests that this is also the case for other major euro area economies. [16] In a low inflation setting, the transmission could even take longer than under normal circumstances.