House prices, persistent pressure on euro zone inflation, ECB study finds


FRANKFURT (Reuters) – House prices, now excluded from euro area inflation data, have reportedly increased consumer prices steadily in recent years, a study released by the European Central Bank showed on Tuesday, highlighting the unease of policy makers facing the current indicator.

Once corrected for housing costs, euro area inflation would have met or even exceeded the ECB’s target within a few years, even as the bank provided extraordinary incentives to raise prices, study figures show. .

The document, which is part of the ECB’s recent Strategy Review, concluded that housing costs would have led to “continuously higher” inflation since around 2014 and that between 2018 and 2020 inflation would have been higher. about 0.2 to 0.3 percentage point.

Chart: Eurozone inflation versus house price growth: https://fingfx.thomsonreuters.com/gfx/mkt/mopankwynva/Pasted%20image%201632214952446.png

The ECB halted asset purchases, commonly referred to as quantitative easing, at the end of 2018 and house price figures seem to support the argument of conservative policymakers at the time that inflation developments allowed for a more outflow. fast.

Although the ECB does not calculate inflation data, it said in July that it would consider estimates of the cost of owner-occupied housing over inflation until Eurostat, the statistical agency of the United States. ‘EU, sets the broader measure.

Chart: inflation in euros corrected for house price growth: https://fingfx.thomsonreuters.com/gfx/mkt/gdpzyqkndvw/Pasted%20image%201632216466519.png

Over two decades, however, the adjusted inflation figure would have been little different, according to the study, as housing costs could have been a drag on prices.

Still, political hawks argue that unusually low interest rates put upward pressure on house prices, so that pressure on inflation is likely to persist for years to come and the data used to calibrate politics do not capture it.

The document added that experimental quarterly inflation figures with housing included could be released in 2023, while official quarterly data is not expected until 2026.

(Reporting by Balazs Koranyi; Editing by Emelia Sithole-Matarise)


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