(Bloomberg) -- European Central Bank Governing Council member Madis Muller cautioned against lowering borrowing costs too early, with the rise in salaries still too strong to be compatible with the 2% price goal.

“It would be prudent to be patient with the first rate cut”, the Estonian central bank chief said in an interview. “Wage growth is still higher than what we would like to see to be sure it’s consistent with our inflation target.” 

Speaking in Ghent, Belgium, where he’s attending a meeting of European finance ministers and central bank governors, Muller said that he would be “more comfortable to wait for first quarter data to be able to say confidently that all indicators suggest we can lower rates.” 

Those figures will only be available at the end of April, too late for the ECB monetary policy meeting at the start of that month.  

Policymakers are zeroing in on wages and labor costs as a key factor in deciding when to cut interest rates, as strong pay growth is threatening to keep inflation higher for longer. Growth in negotiated wages in the euro zone slowed to 4.5% at the end of 2023, according to ECB data published earlier this week.

Although most officials see June as the most appropriate juncture for easing monetary policy, some have suggested they may be in favor of a move before that. 

“It’s risky to act too soon and then find out you made a mistake that you have to correct”, Muller said.

Muller also said:

• “The decision is always more difficult around turning points.”
• “The performance of the euro area economy has been weaker than what was expected earlier last year, with the recovery now being delayed by at least a quarter. But there are some indications that we are about to turn the corner.”

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