The ECB is unable to restore inflation in the euro zone

The ECB is still trying to bring inflation in the euro zone back towards the inflation target by maintaining a very expansionary monetary policy. But given the causes of the low level of inflation in the euro zone, the ECB cannot succeed: The fall in unemployment and the hiring difficulties have led to an acceleration in wages and unit labour costs; the ECB’s expansionary monetary policy has therefore contributed to the stimulation of demand, the fall in unemployment and the faster increase in labour costs; But the absence of inflation in the euro zone is due to euro-zone companies’ lack of pricing power (capacity to increase prices), as they cannot pass their cost increases onto their prices. The lack of pricing power is explained by the intensity of domestic and external competition and the low level of sophistication of production. The ECB is obviously unable to correct it: even though the expansionary monetary policy succeeds in restoring labour costs, it is unable to restore inflation.