In Europe, Inflation Could Prove a Surprise

German pay deal could ultimately lead to higher forecasts for underlying inflation, an analyst says

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FRANKFURT—A tentative pickup in wages on both sides of the Atlantic is focusing investors on a crucial risk for financial markets: What if the strengthening recovery leads to higher inflation?

So far there’s less sign of price pressure reviving in the eurozone than in the U.S., despite accelerating economic growth. But some European Central Bank officials think higher prices are around the corner.

That...