(Bloomberg) -- Negotiated wages in the euro area probably failed to slow in the first quarter, thanks mostly to an acceleration in Germany, according to Citigroup economists.

Pay is forecast to have risen by an annual 4.5% in the three months through March, according to a calculation based on national numbers from most of the bloc’s biggest economies, analysts Christian Schulz and Giada Giani said in a report on Thursday. That’s largely because of a 5.6% gain in Germany, where public-sector workers received large one-off payments. 

Growth in negotiated wages slowed in the fourth quarter from a record reached earlier in the year. An official update for the start of 2024 is due on May 23. European Central Bank policymakers are watching such inputs closely, wary that outsized pay hikes could be passed on to consumers and keep inflation above their 2% goal.  

Some officials have sounded optimistic that such a scenario can be avoided. Vice President Luis de Guindos said this week that pay increases are “showing signs of easing, potentially at a faster pace than we previously expected.” 

According to Citigroup, growth in negotiated wages slowed in countries including Belgium, Italy and Spain at the beginning of the year, while remaining steady in the Netherlands. Apart from Germany, Austria also saw an acceleration. 

ECB officials are gearing up for a first interest-rate cut in June, but have signaled an open mind about what happens after that. Many have said that data on workers’ pay, companies’ profits and productivity are going to play a key role in shaping the policy path. 

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