Euro area inflation stood at 2.2% in December, unchanged on the November reading and only slightly above the ECB’s target of “below but close to 2.0%”. According to the Economics Research Team at Goldman Sachs, “We expect inflation to moderate and decline to below 2% in the second quarter of this year.” Meanwhile, core inflation continues its gradual downward trend, and is currently at 1.6%.
What is noteworthy about the behavior of Euro area inflation is its relative stability during the crisis. To be sure, headline inflation rose sharply to 4% during the summer of 2008 on the back of a rise in energy prices, and subsequently fell sharply to -0.6% a year later. Nonetheless, the average of headline inflation from the summer of 2008 until now is 1.9%, bang in line with the ECB’s target.