But since we’ve been raising interest rates, let’s talk about that (Figure 1). Figure 1: The transmission mechanism of monetary policy  When we raise the policy rate, it immediately costs more for banks to borrow from each other or from us. In response, they increase their rates for loans and deposits. That means that people get a higher return on their savings.
And since wage bargaining in many European countries is multi-annual and inertial, this process will naturally play out over several years. In our latest projections, we expect wages to grow by a further 14% between now and the end of 2025 and to fully recover their pre-pandemic level in real terms.