Olli Rehn Says Eurozone Wage Growth Is Moderate, but Energy Risks Cloud the ECB’s Outlook

Available ECB wage data support the relatively contained reading. The ECB’s wage tracker stood at 2.6% in April, with negotiated wage-growth pressures expected to ease in the first half of 2026 and stabilize at lower levels during the year.

Why the Hormuz energy shock complicates the outlook

The reassuring wage data describe the situation so far, not necessarily what will happen if energy disruptions persist. Markets have increasingly priced the possibility that restrictions on shipping through the Strait of Hormuz could last longer, as hopes for a diplomatic breakthrough between the United States and Iran have faded. That has kept a risk premium embedded in energy prices and intensified supply concerns.

The ECB has described the energy shock linked to the Iran war as a force that could raise euro-area inflation while weakening economic growth. Its staff projections also pointed to persistently higher oil prices, lower euro-area growth and higher inflation if the Strait reopened only gradually.

This creates a difficult policy combination. Higher energy prices push inflation upward, but the associated loss of purchasing power, higher production costs and supply disruption can weaken demand and growth. The key question for the ECB is whether the shock remains concentrated in energy prices or starts spreading into wages, services and longer-term expectations.

What it means for the ECB’s September 10 decision

Rehn’s comments argue against a pre-committed policy path. The ECB is likely to compare two developments:

• Contained wage pressure and anchored expectations: This would suggest that policymakers can avoid reacting mechanically to an externally driven energy shock while gathering more evidence.
• Persistent energy inflation or signs of broader pass-through: Rising wage demands, wider price increases or de-anchored expectations would make a tighter policy response more likely. Rehn has previously said monetary policy would need to react quickly if inflation became entrenched through higher wages and prices.

The ECB’s own survey of professional forecasters showed that near-term headline and core inflation expectations had been revised upward in the second quarter of 2026, while longer-term headline expectations remained unchanged. That combination reinforces the distinction between a temporary near-term shock and a more dangerous loss of confidence in medium-term price stability.

The practical takeaway is that the September decision will depend less on the energy-price increase alone than on evidence of persistence. Policymakers will be watching wage settlements, services inflation, inflation expectations and signs that companies are passing higher costs through more broadly.

The possible EUR/USD reaction

The currency impact is similarly two-sided. If markets conclude that persistent energy inflation will force the ECB to keep rates higher for longer, expected euro-area interest rates could rise and support the euro.

However, a prolonged Hormuz disruption would also worsen Europe’s energy costs and growth outlook. If investors focus more on weaker European activity and increased geopolitical risk than on the prospect of ECB tightening, demand for the U.S. dollar could increase and weigh on EUR/USD. Market analysis has highlighted this conflict: even when higher energy prices raise expectations for another ECB rate increase, the growth shock may prove more important for the euro.

The central market test is therefore whether the shock is interpreted primarily as an inflation problem for the ECB or as a larger terms-of-trade and growth problem for Europe. Rehn’s comments leave both possibilities open, but they make one condition clear: moderate wage growth remains reassuring only as long as inflation expectations stay anchored.