Denmarks central bank sees 4% inflation this year, risk of wage-price spiral

COPENHAGEN (Reuters) – Denmarks central bank on Wednesday forecast 4% inflation this year, more than half the level in 2022, and warned high wage increases could delay the slow-down of price increases.

“Inflation will fall significantly this year, but high wage increases may delay the timing of the required reduction in inflation,” the central bank said in a statement.

In 2024 and 2025, the central bank expects inflation to decrease to 3.6% and 3%, respectively. The slower price increases this year are mainly due to lower energy prices, the central bank said.

“It may be necessary to tighten fiscal policy if the risk of an independent Danish wage-price spiral rises further,” central bank governor Christian Kettel Thomsen said in the statement.

The central bank expects the economy to grow by 0.9% this year and by 1.2% in 2024. In September, the central bank forecast the economy would grow by 2.1% this year.

(Reporting by Nikolaj Skydsgaard and Jacob Gronholt-Pedersen, editing by Terje Solsvik and Christina Fincher)