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There has been an awakening. The rise (and fall) of inflation in the euro area

Author

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  • Stefano Neri

    (Bank of Italy)

Abstract
In the summer of 2021, inflation woke up for the first time in many years. The period of low inflation in the euro area ended abruptly with the recovery from the Covid-19 pandemic and the energy crisis. Supply bottlenecks and energy prices played an important role in pushing up core inflation. Despite the rise in consumer prices, the ECB's monetary policy response helped to re-anchor long-term inflation expectations to the new symmetric 2 per cent target. With expectations well anchored, the risks of second-round effects limited and the downside risks to growth heightened, it is time to take stock of the effects of monetary policy so far and those still to come, and wait for the effects of past shocks on inflation to fade.

Suggested Citation

  • Stefano Neri, 2024. "There has been an awakening. The rise (and fall) of inflation in the euro area," Questioni di Economia e Finanza (Occasional Papers) 834, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_834_24
    as

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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2024-0834/QEF_834_24.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    inflation energy prices; supply bottlenecks; long-term inflation expectations; monetary policy;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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