Subsequently, there is still the open question of pass-thru of wage inflation to core inflation. In any case, this way of interpreting the Phillips curve gives credence to the assumption in the ECB Governing Council that euro area inflation is gradually converging to our price stability target.
On the definition of price stability and monetary policy space Although headline inflation has been picking up, underlying inflation is still persistently around 1 %, reflecting continuing soft domestic price pressures. Unemployment is declining, but there is still considerable labour market slack in the euro area.