Evidence of overheating in the domestic economy, for example through wage-price spirals
, inflation overshoots, and adverse effects on household and corporate balance sheets.
But in the developing world, these wage-price spirals
could turn very nasty, and policymakers there often seem reluctant to deal with the underlying causes.
Negotiators will look at the total picture and will take into account the economic situation and the need to avoid inflationary wage-price spirals
In a press release, dated 1 July, it responds to the recent warnings from the European Central Bank against wage developments leading to an inflationary wage-price spiral.
Clearly, high inflation is hurting local enterprises in the form of high input costs, while the overall cost of living has zoomed, triggering wage-price spirals
European economies, however, have stronger unions and institutional arrangements that may cause them to be more prone to wage-price spirals.
The greater importance attached to price stability as a goal of monetary policy implies that oil-induced wage-price spirals are not being validated or encouraged by an accommodative policy stance.