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The European Central Bank (ECB) is the central bank of the 19 European Union countries which have adopted the euro. Our main task is to maintain price stability in the euro area and so preserve the purchasing power of the single currency.
The rate of inflation has a bearing on the relative price of individual products and therefore on demand for those products. Using new micro price data, this column investigates how high the optimal inflation rate must be to prevent relative product demand from being distorted. In contrast to a common claim, it finds that the optimal rate is not zero for a large part of the
Date The role of demand and supply factors in HICP inflation during the COVID-19 pandemic – a disaggregated perspective 0 / 0 x Prepared by Derry O’Brien, Clémence Dumoncel and Eduardo Gonçalves Introduction The economic impact of the coronavirus (COVID-19) pandemic is not a standard textbook shock. Instead the shock is multidimensional, with sources on both the external and the domestic side, on both the demand and the supply side, and at both the aggregate and the sector-specific level. This poses challenges for the assessment of inflation...