Inflation and its determinants: a measure of our ignorance

Four years after the start of the economic recovery, euro area inflation has yet to return to pre-crisis levels. While core inflation average d 1 1,8% between 2000-07, it has oscilated around 0,9% since 2014. This Focus examines the slowdown in inflation. While the reasons behind the slowdown remain, to some extent, elusive, we will see that three factors alone can go a long way explaining the observed trend: the rise in unemployment, higher underemployment and, perhaps surprisingly, the slowdown in productivity growth. The unemployment rate has often been used...

Monthly Report - Focus