Update inflation model – Fight against inflation remains tough

Headline inflation remains stubborn

Our quant model for inflation in the euro area based on machine learning (see here ) continues to expect a tough battle against inflation. The model forecast in February changed little compared to January and predicts inflation above the ECB's target of 2% for the coming months. Inflation will likely fall only in February.

For our forecast overall, we generally add further assumptions to the purely data-driven quant model. In particular, assumptions about insurance premiums and other special factors for January have in the past driven a wedge between the overall forecast and the quant model. As these special factors have now largely been realized, the difference between the forecast and the quant model has narrowed significantly.

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