Has the euro made prices increase?
The main objective of monetary policy is price stability, which aims to maintain inflation rates at a level lower than, but close to, 2% over the medium term. Since the creation of the euro in 1999, this objective has been, on average, respected in the euro area.
The surveys conducted amongst the public show that consumers often feel that inflation is higher than actual price indexes indicate. The studies of the ECB have notably shown that numerous factors can influence our perception of inflation.
- We generally pay less attention to stable prices or to prices that are on the decrease than to prices that are on the increase, even though all of these changes are of equal importance for the calculation of the average inflation rate.
- On the other hand, we often pay too much attention to the variation in prices of goods and services that we frequently buy, like for example basic food products, which can lead us to over-estimating the actual inflation rate.
- Furthermore, we as consumers have a tendency to compare current prices in euro to the price of goods and services in the old currencies. However, we generally do not take the inflation rate into account, which would have increased the prices of goods and services expressed in old currencies.
- Finally, let us not forget that an increase in prices is often due to improved quality. We encounter this phenomenon, mainly for products that benefit from numerous technical advances. The example of cars explains this phenomenon well: their level of security has greatly improved but their purchasing prices have barely increased.
