This is all the more important in a currency union as large and diverse as the euro area, where too low area-wide inflation carries substantial risks that parts of the currency area potentially face long periods of falling prices.
Specifically, the medians of the Policy Board members' forecasts of the year-on-year rate of change in the CPI for all items less fresh food presented in the July 2017 Outlook Report are 1.1 percent for fiscal 2017, 1.5 percent for fiscal 2018, and, excluding the direct effects of the scheduled consumption tax hike, 1.8 percent for fiscal 2019.3  2  It is assumed that the consumption tax will be raised to 10 percent in October 2019 and that a reduced tax rate will be applied to food and beverages -- excluding alcohol and dining-out -- and newspapers.