"In the context of elevated inflation in the euro area (despite recent declines), it is useful to look at the response of public wages to gauge further pressures on private sector wages and core inflation. While the public sector accounts for only about one-fifth of the economy-wide compensation of employees in the euro area, it can provide a relevant signal for wage negotiations in the private sector. Public wage growth can thus have a bearing on inflation through both a direct channel (aggregate demand) and an indirect channel (as a signal for changes in private sector compensation). This box provides an update on previous analyses of public wage projections for the euro area, including as regards the institutional features that govern public wage-setting across euro area countries.."

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