FRANKFURT (Reuters) – Some members of the Governing Council of the European Central Bank (ECB) expressed concern at their March meeting about the institution’s new economic forecasts, deeming them too optimistic, the proceedings show. released Thursday.

The ECB announced on March 16 that it expects a gradual slowdown in inflation – approaching the 2% target by 2025 – a moderation in wage growth and finally an acceleration in economic growth .

However, some of its 26 officials expressed doubts about what they called “immaculate disinflation”, according to the minutes of the meeting.

Council members argued that there was only a slim chance that inflation would fall back to low levels as quickly as suggested by the ECB staff’s March forecast, which gives the impression of “immaculate disinflation” (i.e. inflation returning to target with very little cost in terms of lost output),” the ECB said in its “minutes”.

The Frankfurt institution added that “a number of members” considered that the risks to the outlook for inflation were “on the upside over the whole horizon”.

The ECB last month raised its main interest rates by 50 basis points, as it had promised.

Sources told Reuters that the ECB’s next rate hike is likely to be smaller than previous ones, due to lingering uncertainty about the financial sector and the lagged effect of its earlier hikes.

SALARIES AND BENEFITS

Members have openly disputed forecasts presented by Chief Economist Philip Lane, including that wage growth would average 5.3% this year, before falling to 4.4% in 2024 and 3, 6% in 2025.

“Doubts have been expressed as to the appropriateness of the slowdown in wage growth towards the end of the horizon projected in the March projections,” the ECB said.

Others argued that it was consistent to scale back nominal wage growth while reducing inflation expectations.

An analysis of underlying inflation factors shows that wage growth is becoming its main driver and that lately its contribution has been about twice as large as in 2019-2020.

But ECB officials also factored in the role of corporate markups in price developments.

“Members largely reaffirmed that earnings and margin developments warrant constant monitoring and further analysis, as do wage developments,” the ECB said. “The frequent references to salaries in public communication does not mean that the evolution of profit margins is not taken into account”.

(Francesco Canepa and Balazs Koranyi, Laetitia Volga, edited by Blandine Hénault)

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