European Central Bank President Mario Draghi said the central bank is “looking very closely at the labor market and wage bargaining,”adding that it sees some progress, but not enough.

Action Economics said that as they highlighted in their report last week, since the crisis, official unemployment measure seem to be understating the degree of slack in the labor market and alternative measures of underemployment show a much higher degree of spare capacity which, to some degree, explains the fact that average wage growth remains modest.

For the ECB, that means underlying inflation pressures also remain benign, despite robust growth measures, which underpins the arguments of the dovish camp at the central bank.

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