ECB’s Constancio says wages not increasing more is am important puzzle in advanced economies

ECB VP Constancio in a scheduled speech 22 Sept

  • the apparent disconnect between inflation and economic slack seems to have made interpreting and controlling inflation dynamics more difficult
  • the exact nature and mechanisms that are at the core of price stickiness continue to be imperfectly understood.  The debate among macro-economists on the foundations of nominal price rigidities, and therefore how to model them, is ongoing and far from settled. This is important for our understanding of the Phillips curve from a structural point of view, going beyond a simple correlation between inflation and economic activity. The structural Phillips curve relationship that comes out of the different models of nominal rigidities can be very different.
  • these differences have implications for determining the degree of price stickiness and thus the slope of the Phillips curve.

Full speech, entitled «Understanding and overcoming low inflation» here

Update:

  • Euro rise may have limited effect

EUR pairs all off session highs as NA desks get underway.

EURUSD 1.1973, EURGBP 0.8825 EURJPY 134.07

                      Constancio concerned over low inflation and wages puzzle

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