Workers in parts of Europe and South America are becoming increasingly successful in securing deals linking wages to inflation, a trend closely monitored by monetary policymakers as they seek to keep price rises under control.
Linking people’s pay to inflation remains much less commonplace than during the 1970s, when it was widespread in several economies — including the US and UK. But deals that include indexation clauses never went away in some countries and there are signs of a resurgence in places such as Spain and Brazil.
Claudio Borio, head of the monetary and economic department at the Bank for International Settlements, often dubbed the central bankers’ bank, said that by distorting market signals, indexation made inflation harder to shift.