Housing Prices Are the Missing Ingredient in the ECB’s Inflation Estimate

Economists say that by overlooking one of consumers’ biggest expenses, the ECB effectively traps itself into pumping ever more monetary stimulus into the financial system. A striking metric is that Eurostat, the European Union’s statistics agency, assumes people spend about just 6.5% of their after-tax pay on shelter.
“This of course is a ridiculous figure, when the average earner is spending around 30% of his salary on rent,” economist Daniel Gros, director of the Centre for European Policy Studies think tank in Brussels, said in an interview. There is a “fundamental problem” in a gauge whose components are “so divorced from private-market data.”

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