You are here

Economics in a picture

Economics in a picture

Since 2013, euro area core inflation has been below projections


Since 2013, euro area core inflation, measured by the HICP excluding food and energy, has hovered around 1%. The graph exhibits the observed evolution of the HICP excluding food and energy and each yellow line displays the projected values for this variable in the successive European Central Bank (ECB) and Eurosystem projection exercises. A clear conclusion from the graph is that the projected path for core inflation has been much higher than its observed behaviour. 

Faced with these developments, the economic literature has presented several possible reasons behind the low inflation in the euro area. Amongst them, the incorrect measurement of the economic slack, the weakening of the transmission from wages to prices, globalization, technological innovation, the low level of longer term inflation expectations and the current environment of persistently low interest rates. The individual contribution of each of these arguments is difficult to evaluate. Nevertheless, all of them suggest that euro area inflation might remain at levels below the ECB medium-term price objective which poses significant challenges to the conduct of monetary policy in the near future. 

For more details see Box 2: “Low inflation in the euro area: possible causes”, published in the Economic Bulletin of Banco de Portugal, December 2019.

Prepared by Alexandre Carvalho. The analyses, opinions and findings expressed above represent the views of the author and not necessarily those of Banco de Portugal or the Eurosystem.


If you want to receive an e-mail whenever a new “Economics in a picture” is published send your request to