While the domestic recession and falling energy prices are the major underlying reasons for the low rates of inflation recorded since 2014, there are a number of additional contributory factors, including the flow-through of generally weak global demand and certain industry-specific factors.
I won’t detail them today, except to mention that the European System of Central Banks has carried out a significant body of research on the subject, which was published last week.1 Decline in equilibrium interest rates Economists use a concept called, variously, the equilibrium real rate or the natural rate.