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An update on the accuracy of recent Eurosystem/ECB staff projections for short-term inflation
Forecasting inflation has been extremely challenging in recent years given the large shocks hitting the euro area economy. The extraordinary series of shocks seen post-2019 – including the coronavirus (COVID-19) pandemic and Russia’s war against Ukraine – led to a surge in inflation. These shocks were exceptional in nature and so large in scale that assessing their transmission through the economy and into consumer prices in real time posed significant challenges. Importantly, several of the shocks were outside the historical distributions, severely limiting extrapolation from past patterns. In order to provide ... (full story)