
Inflation is often confused with changes in relative prices. The recent sharp increase in energy prices, which has also pushed up food prices, has hit poorer households especially hard, thus creating the impression that inflation increases inequality. However, it is the large changes in relative prices and not the average inflation rate (of now 7%) that is the real problem. We also show that rents - which are more important for low-income households - provide a significant offset for higher energy prices on average for the euro area, as they have lagged inflation, albeit with large differences across countries. This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the Committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 5 June 2023.
Page Count:
0
Publication Date:
2023-01-01
ISBN-10:
9284806542
ISBN-13:
9789284806546
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