Summary: EA inflation remains subdued and below target

What the chart shows: The chart shows euro area (EA) inflation, headline, core (excluding food and energy) and trimmed mean (excludes the fastest and slowest changing items) as twelve-month changes.

Why is the chart important: Ultra-low interest rates and loose central bank policies – including ‘money printing’ in a number of countries – have raised concerns that inflation could take off in the near future. While there almost always is an upward pressure on inflation in modern societies, recent inflation developments and broad money trends (which is a key indicator of future inflation) show that there is little or no risk of a near-term surge in inflation. In the year to June, EA inflation remained below the ECB’s target of ‘below but close to 2%’ for a fifth consecutive month. Moreover, excluding the impact of food and energy, inflation has been below target for five years. As long as EA domestic demand remains weak and even for some time after it has picked up (given the slack in the EA economy), inflation will also remain quiescent.