The transition to low inflation The period when a high inflation economy moves to low inflation is never an easy one. After years of high inflation, the public’s expectations of inflation have been slow to adjust downwards. As a result, they have been less willing to adjust their interest expectations downwards.
In the HICP, therefore, we turn to a uniform threshold value: if the share of a new product exceeds 0.1 per cent of total expenditure, this product should be included in the price index. It is true that this method fails to capture the increase in consumer surplus generated by a new product and early price decreases.