Under what conditions does inflation return to below 2%?

We look at the situations of the United States and the euro zone. If wages are under-indexed to inflation (a 1 percentage point rise in inflation causes the nominal wage to rise by less than 1 percentage point), inflation: Increases with the rise in the relative price of imports and in the price of energy and food; Decreases with productivity growth; Decreases with the unemployment rate. We estimate econometrically this determination of inflation, and study the condition under which (headline) inflation would fall below 2% in the United States and the euro zone. This condition is: In the United States, either a 3 . 1 percentage point fall in the growth rate in energy and food prices, or a 7.2 percentage point rise in the unemployment rate; In the euro zone, either a 12.2 percentage point fall in growth in energy and unprocessed food prices, or a 17 percentage point rise in the unemployment rate. These estimates show that a rise in unemployment, even by a few percentage points, will have only a minor effect on headline inflation.