MNI BRIEF: ECB Should Use New Local Inflation Measure - Study

Domestic euro area inflationary pressures have increased over the past year, according to a new indicator that should be used to supplement HICP and other measures used to help shape monetary policy, a paper published in the latest ECB Economic Bulletin argues.

The “Low IMport Intensity” (LIMI) inflation indicator derives the import intensities of HICP items using information from national accounts and input output tables, aggregating those HICP items with a relatively low import intensity. “Although the sharp rise in headline inflation is mainly explained by imported inflation, domestic inflationary pressures have also increased over the past year,” the paper’s authors conclude.