Bundesbank finds no wage-price spiral forming despite Iran conflict energy shock

Germany’s central bank just delivered a rare piece of good news for European policymakers: the energy price surge triggered by the Middle East conflict is not bleeding into worker pay demands. The Bundesbank’s May 2026 Monthly Report found that trade unions are keeping their wage requests roughly where they were before the crisis escalated, and actual negotiated pay growth is trending downward. The numbers tell a calmer story than the headlines Negotiated wages in Germany rose 2.4% year-over-year in May 2026, a modest step down from 2.6% in April. That deceleration happened while consumer prices were moving in the opposite direction. German Harmonized Index of Consumer Prices inflation hit 2.8% in March 2026. The Bundesbank expects it to edge up to 2.9% by year-end, driven primarily by elevated crude oil and natural gas costs linked to the ongoing Middle East conflict. Trade union wage requests remain in the 6% to 11% range over multi-year contract periods, consistent with the levels unions were targeting before the conflict intensified. In other words, the energy shock hasn’t moved the needle on what organized labor is asking for. Expected earnings growth across the German economy...