The Harmonised Index of Consumer Prices (HICP) has been a tremendous achievement in terms of providing a reliable, timely and comparable measure of consumer inflation across EU Member States. But whether it adequately captures the cost of living should be subject to regular review. A well-known example is the cost of housing.
Even though nominal interest rates decline, if prices are expected to decline as a trend, investment cost on a real basis will remain high and incentive for business fixed investment will wane. In order for firms to transform innovative ideas into actual technologies and products, it is necessary to introduce new machines and build new factories.