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Falling energy prices will lower core inflation in the euro zone and rapid wage growth is not putting unnecessary pressure on prices, European Central Bank chief economist Philip Lane said on Tuesday.

Inflation has remained persistently high for almost two years, with some fearing that core inflation could remain above the ECB's 2% target, likely to trigger self-reinforcing consumer prices.

Rejecting those concerns, Lane said core inflation, an indicator excluding seasonally fluctuating prices, has increased as high energy costs are calculated into the price of everything from goods to services. This process will necessarily reverse now that gas prices are back at pre-war levels in Ukraine.

"I don't think it's symmetrical, but when energy prices fall, core inflation follows this move because less pressure comes from energy prices, less pressure on the cost of living, and therefore on nominal wage increases," Lane told a conference.


On average, wages are rising in a very moderate way," he said. Nominal wage growth is expected to peak this year, but it will still take time until 2025 for real wages to return to their 2019 levels.

According to him, the spectacular change in the direction of energy prices will be reflected as weakening core inflation, but the time needed for this effect and its size are not certain.

Meanwhile, Croatian National Bank Governor Boris Vujcic, who is also a member of the ECB's governing council, expressed some scepticism about reducing inflation, saying he had doubts that the ECB could bring inflation back to 2 per cent in the next two years.