Fiscal policies in several euro area countries might be less neutral than we expected some time ago. Regarding inflation developments, HICP inflation stood at 2.0% in August, down from 2.1% in July. Headline inflation remains somewhat higher than in the first months of the year, reflecting the strong increase in oil prices.
Measures of underlying inflation remain generally muted but have been increasing from earlier lows as domestic price pressures are strengthening and broadening. Underlying inflation is expected to increase further over the coming months as the tightening labour market is pushing up wage growth.