Eurozone: The hypothetic return of inflation
Jean-Luc PROUTAT
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Eurozone inflation is accelerating. This summer it rose to a little over 2% year-on-year, the highest level since 2012.
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Energy and food prices, the main drivers of this upturn, have increased significantly.
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Looking beyond these two relatively volatile categories, core inflation is still mild.
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This inertia can be attributed primarily to wages, which have not accelerated much despite the decline in unemployment and the hiring difficulties expressed by business leaders.
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In the eurozone, like in most of the advanced economies, the Phillips curve seems to have flattened: wages and prices are still responding to capacity pressures, but less so than in the past.
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This has implications for monetary policy as well as interest rates, which are bound to remain very low in the years ahead.
Author
BNP Paribas Team
BNP Paribas
BNP Paribas Economic Research Department is a worldwide function, part of Corporate and Investment Banking, at the service of both the Bank and its customers.
