The European Central Bank must keep a close eye on how rising oil prices could feed into wages, ECB board member José Manuel Escrivá said. His warning comes as crude costs climb, threatening to reignite inflation across the euro area and complicate the central bank’s next moves on interest rates.
Why wages are the core concern
Oil prices have jumped in recent weeks, pushing up the cost of transport and manufacturing. Escrivá argued that the real danger isn’t the immediate price spike — it’s what happens next. If workers start demanding higher pay to offset their higher bills, that could lock in inflation for longer. “We need to monitor the wage channel,” he said. The ECB has spent months trying to cool inflation back to its 2% target, and a wage-price spiral would make that job harder.
The inflation picture gets messier
Higher oil prices put direct upward pressure on consumer prices. But the ECB’s staff projections already assume crude will stay elevated through 2025. What keeps policymakers up at night is second-round effects: companies passing on energy costs, then workers asking for raises, then companies raising prices again. Escrivá didn’t mince words — he said the current path of oil prices could “trigger inflationary pressures” that derail the euro area’s economic stability.
For months, the ECB has held rates steady after a long tightening cycle. Inflation had been drifting lower, giving the governing council room to wait. Escrivá’s comments suggest that window may be narrowing. If oil keeps rising and wage data starts to show heat, the ECB could face pressure to delay any rate cuts — or even consider a hike. That would put it at odds with the U.S. Federal Reserve, which is already signaling looser policy. The divergence could weaken the euro and push import prices even higher, creating a feedback loop.
The central bank’s next policy meeting is in mid-April. By then, fresh wage negotiations from Germany’s metalworkers and other big union deals will be in. Escrivá made clear that those numbers will matter more than oil prices alone.
