The European Central Bank (ECB) will need to see proof of slowing wage growth in the euro zone before interest rates can be lowered, ECB governing council member Klaas Knot said on Sunday.
“We now have a credible prospect that inflation will return to 2% in 2025. The only piece that’s missing is the conviction that wage growth will adapt to that lower inflation”, the Dutch central bank governor said in an interview with Dutch TV program Buitenhof.
“As soon as that piece of the puzzle falls in place, we will be able to lower interest rates a bit.”
In terms of costs, yeah, that’s exactly what they do. Someone’s getting money for it, be it the land owner, the workers, the company providing the tech for it. Doesn’t matter, there’s always a person at the end of the cost pipeline.
In terms of inflation, this just doesn’t help. Workers spend almost everything they get (living paycheck to paycheck), rich people do still spend the money (which means the money ends up in someone elses pocket) and yes, they will spend more than the average worker, but they also invest a big chunk, usually locking up the money, and at least temporarily taking it out of circulation.
Which reduces inflation, that’s the point of high interest rates :)