Why Central Banks Are Watching the Wage-Price Spiral

In this episode of Monetary Policy Explained, Lucas and Luna drill into one of 2026's most debated concepts: the wage-price spiral. They explore whether the classic 1970s-style feedback loop — wages up, prices up, wages up again — is actually re-emerging in today's economy. The specific case? The German public-sector wage deal earlier this year, where unions secured an 8.5 percent increase over 24 months. Lucas breaks down why the European Central Bank is watching that deal closely, how it could feed into services inflation, and what the latest euro-area negotiated wage data — which came in at 4.5 percent year-over-year in Q1 2026 — tells us about the risk. Luna pushes back on the narrative, pointing out that productivity growth and corporate margins complicate the picture. No hot takes, just a careful look at one transmission mechanism central bankers lose sleep over. #WagePriceSpiral #MonetaryPolicy #CentralBanks #ECB #Inflation #GermanWageDeal #ServicesInflation #NegotiatedWages #LaborMarket #Productivity #CorporateMargins #CostPushInflation #DemandPullInflation #WageGrowth #TransmissionMechanism #Economics #Business #FexingoBusiness Keep every episode free: buymeacoffee.com/fexingo