ECB's de Guindos warns against tying wages to inflation

FRANKFURT: European Central Bank President Luis de Guindos warned on Tuesday against tying wage increases to inflation this year as that could transform a temporary rise in prices due to the reopening of a pandemic-struck economy into something more permanent.

"Some countries in Europe have indexation of pensions and the salaries of public officials to inflation," de Guindos said during an online event.

"That should be avoided because if you have a clear indexation of the economy to the evolution of a temporary shock... then you can convert this temporary upward evolution of inflation to something that is much more permanent. And that something that we should avoid."

He repeated the ECB would be "very vigilant" about these "second-round" effects of the current rise in prices.