Headline inflation in the euro area has lately been hovering around 1.0% and stood at 0.8% in September, lower than in the first months of this year, when it was around 1.5%. This largely reflects the decline in the annual rate of change in energy prices. Measures of underlying inflation remain generally muted.
While labour cost pressures have strengthened and broadened amid tightening labour markets, their pass-through to inflation is taking longer than previously anticipated. Looking ahead, underlying inflation is expected to increase over the medium term, supported by our monetary policy measures, the ongoing economic expansion and robust wage growth.