Core Viewpoint - A significant increase in a key wage growth indicator in the Eurozone has made the European Central Bank (ECB) more cautious regarding further interest rate cuts [1] Group 1: Wage Growth - In the second quarter, negotiated wages increased by 3.95% year-on-year, up from 2.46% in the first quarter, but still below the peak of 5.4% reached in 2024 [1] - The ECB's confidence in stabilizing inflation at 2% relies on a slowdown in wage growth and a decrease in price increases in labor-intensive service sectors, which are currently close to 3% [1] Group 2: Market Expectations - The market widely anticipates that the ECB will maintain the key deposit rate at 2% in September [1] - The ECB's tracking indicator for wages across 20 countries suggests that wage growth will significantly slow down by early next year [1]

Group 1 - A key indicator measuring wage growth in the Eurozone has significantly increased, prompting the European Central Bank (ECB) to maintain a cautious stance on further rate cuts [1][4] - In the second quarter, negotiated wages rose by 4% year-on-year, up from 2.5% in the first quarter, but still below the peak of 5.4% expected in 2024 [1][4] - The ECB is confident in stabilizing inflation at 2%, based on expectations that wage growth will slow and inflation in labor-intensive service sectors, currently around 3%, will also decline [1] Group 2 - Data tracking wages across 20 Eurozone member countries indicates a significant decline in wage levels is expected by early next year [4] - Despite a substantial increase in wages reported by the German central bank, a decline is anticipated due to falling inflation rates and a poor economic environment [4] - Bloomberg economist Martin Ademmer suggests that the rise in negotiated wage growth may be temporary, driven by one-time payments, and expects wage pressures to ease in the coming quarters, which could help lower high service sector inflation [4]