Beware of forecasts of core inflation in the euro zone

Many economists and the ECB believe core inflation will rise in the euro zone due to the severe pressure on the labour market. But we do not believe euro-zone core inflation will rise, on the contrary; we should not forget that: Prices do not follow unit labour costs if competition (domestic and external) is strong ; Core inflation is correlated with the oil price (via goods and services that use oil in their production). If euro-zone core inflation does not pick up, the ECB will have an additional argument to maintain a very expansionary monetary policy.