News that is eagerly awaited by workers and pensioners, but less so by employers...
The automatic indexation of wages, the mechanism that adjusts salaries, pensions, and family benefits by 2.5%, could be triggered earlier than previously expected, potentially before the third quarter of 2026. That is, if inflation reaches the required threshold.
In its latest report, STATEC outlines several scenarios: Under the ‘high’ scenario, inflation would reach 2.5% in 2026 and 2.4% in 2027, which would result in the next index-linked increase taking place in the second quarter of 2026, with a subsequent one expected a year later. The most recent indexation took place in May 2025. In contrast, the ‘low’ scenario, with projected inflation of 1.4% for both 2026 and 2027, foresees the next indexation only in the third quarter of 2026.
STATEC considers the high scenario to be more likely.
On the one hand, STATEC cites falling energy prices, particularly electricity and petroleum products, as the primary reason behind a reduced inflation forecast. The simultaneous drop in electricity and fuel prices helped push annual inflation down to 1.3% in January 2026.
The government’s continued support for household electricity bills is expected to reduce prices by 10% in 2026 and 7% in 2027. Additionally, crude oil prices are projected to fall by 14% in 2026 – to $60 per barrel – and by a further 6% in 2027, owing to a global oversupply despite ongoing geopolitical tensions, which have shaken global supply chains. Gas prices on the futures market are also expected to decline, translating to a 10% fall in tariffs in 2026 and 5% in 2027. Overall, energy prices in Luxembourg are forecast to decrease by 6.3% in 2026 and 3.5% in 2027.
On the other hand, however, projections from Oxford Economics, on which STATEC’s forecasts are based, revised eurozone inflation for 2026 upward from 1.5% to 1.7%. In this context, underlying inflation in Luxembourg is expected to remain elevated at 2.2%, driven largely by rising food prices and inflation in the services sector.
Adverse weather and agricultural challenges could push food inflation to 2.8% in 2026 and 2.4% in 2027. Inflation in the services sector is forecast at 3.1% in 2026, moderating to 2.8% in 2027. Overall inflation in Luxembourg is projected at 1.8% in both years.
According to STATEC’s central scenario, the next wage indexation would take place in the second quarter of 2026, followed by another in the third quarter of 2027.
A definitive conclusion is expected in the coming months.
