“There is still a certain pressure from higher wages. That applies particularly in industries that deliver services because these need relatively large amounts of labour,” Nationalbank director Christian Kettel Thomsen said in a press statement.

The central bank said it expects higher wages to exert an upward force on inflation during the next few years.

But the bank also noted that inflation is moving in the right direction and is expected to arrive at an overall level of 2.2 percent in 2024.

The Nationalbank uses EU-adjusted figures, which placed the inflation level for Denmark at 0-6 percent in February compared with February 2023.

As such, the Danish central bank expects inflation to increase between now and the end of the year.

In 2025, the Nationalbank predicts that inflation will rise to 2.6 percent before later falling off to 1.7 percent.

The spring of 2023 saw a series of new collective bargaining agreements across Denmark’s labour market system. The new agreements secured wage increases for workers in the vast majority of sectors. These wage rises were themselves a response to inflation in 2022, which was provoked by factors including the energy crisis and the Russian invasion of Ukraine.

Because the wage increases agreed in the labour deals are spread over a number of years, their effects will still be felt in 2025. The Nationalbank said in its forecast that it expects wage rises of over 5 percent until 2025, when a new round of collective bargaining will take place.

Analyst Las Olsen, a senior economist with Danske Bank, said in comments to newswire Ritzau that he agreed with the central bank’s assessment of the situation.

But Olsen also said that he expects the pressure on the economy to be less than feared.

“We also expect to see this effect, but not a powerfully as the Nationalbank expects,” he said in a written comment.

That is because “wages in our view will rise slightly less steeply than the collective bargaining agreements suggest”, he said.