Why core inflation in the euro zone has been chronically below the inflation target since 2009

Since the subprime crisis, core inflation in the euro zone has been chronically below the 2% inflation target. This was no t the case beforehand. This situation may result from: A structural (not cyclical) decline in demand for goods and services; A structural increase in the supply of goods and services; The persistence of an excessively high neutral interest rate. It is likely that this constantly below-target inflation results mainly from weak investment (corporate and housing), which negative real interest rates have not sufficed to correct. The ineffectiveness of economic policy, and in particular the expansionary monetary policy, at raising investment is therefore an important explanation for the low level of core inflation in the euro zone since the subprime crisis.