Inflation persistence and policy implications for central banks

The change in the perception of price stability can be considered one of the key fundamental insights introduced into the conduct of monetary policy by the recent economic crisis. Deflationary or disinflationary pressures hampering the necessary moderate inflation for economic growth and the low effectiveness of monetary authorities’ measures to stimulate inflation have drawn economists’ attention to studying the persistence of inflation. At the same time, its presence weakens the success of monetary authorities in achieving stable inflation during periods when inflation is below or above the targeted level. The main objective of the chapter will be to quantify the extent of persistence in inflation and its structural features in euro area member countries and countries on a global scale. Clarifying the persistence of inflation and its key factors in individual countries, taking into account the definition of the inflation target, monetary policy strategy, exchange rate regime and other economic fundamentals, will allow us to revise the current monetary policy framework of the euro area and formulate suggestions for its adjustments.