In an effort to ensure that rising consumer prices do not spur inflation, central bankers are doing their best to clean up their house.

Central banks are not immune to the once-in-a-generation shock of falling costs of living. Even if they don’t like it, central banks are taking the same hit as everyone else in the labor market as their bosses seek to stop runaway inflation in the countries they oversee by offsetting excessive wage increases.

Some grumble. Withdrawals from the Bank of Brazil last year, as well as some from the Bank of England in 2017, show how such institutions really struggle to contain discontent, especially during global labor unrest.

Even so, however, central bankers face a strong political imperative to enforce wage discipline, especially when negotiations do not extend to the public sector. The bitter alternative, if their employees fully compensate for the loss of purchasing power, is to be criticized for hypocrisy and the risk of rising inflation.

“Central banks should be first in line to prevent a price and wage spiral,” said Carsten Junius, chief economist at Bank J Safra Sarasin and former chief executive of the International Monetary Fund.

In the euro area, where inflation peaked at 10.6% last year – a record in the history of the single currency – ECB staff received a 4% pay raise by 2023. The previous increase was 1.48%, which is not keeping up with the increase. in prices. At the Banque de France, the 4% boost granted in July was the first in five years. News that the Bank of England is also cutting wage requirements only broke this week.

Finally, while the Federal Reserve remains silent on the disclosure of its employees’ salaries, its 2023 pay scale released this month shows a maximum increase of 5.1% in the lower and upper range of each pay tier. , except for the lowest level. . This compares to an average U.S. inflation rate of 8% in 2022.