At 1.4%, core inflation in 2023 is predicted to reach levels above its post-2008 financial crisis average of 1.2%, reflecting expectations that slack will gradually be reabsorbed within the projections horizon, thereby putting upward pressure on wage growth.
Consequently, the current subdued headline inflation outlook in the euro area, relative to core inflation, is to a large extent driven by assumptions regarding future oil price developments. Chances and risks around the euro area inflation outlook Uncertainty around the baseline inflation outlook remains, however, exceptionally high at present.