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No signs in France of wage-price spiral - central bank survey

·1-min read

PARIS (Reuters) - French businesses do not for now see the makings of a wage-price spiral despite high inflation expectations, the country's central bank said on Thursday, drawing on the findings of a quarterly survey.

With inflation surging worldwide, central banks are on the lookout for signs of a uncontrollable wage-price spiral, where firms have little choice but to steadily hike wages in pace with prices.

The Bank of France began surveying executives at 1,700 firms last November about price trends they are seeing in order to be less dependent on financial markets for a picture of forward inflation expectations.

Publishing the results for the first time, the central bank said median inflation expectation of firms surveyed at the end of May-early June stood at 5.0% one year from now, unchanged from the current inflation rate and from a rate of 2.6% back in November.

However, out three to five years, the median inflation expectation put the rate at 3.0% while about 35% of executives expected a rate around 2%, in line with the European Central Bank's medium-term target.

The median expectation for growth in base wages a year from now stood at 3.0%, up from 2.4% in November.

"These wage expectations remain lower than those for inflation expectations over the same one-year horizon and do not seem to point to the triggering of a price-wage loop," the central bank said.

The Bank of France added that the latest survey was conducted before the European Central Bank laid out plans on June 9 to normalise its monetary policy, which the French central bank said would contribute to the gradual "re-anchoring" of inflation expectations.

(Reporting by Leigh Thomas; editing by John Stonestreet)

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