Sofie R Waltl

CERF Fellow of Cohort 2024 - 2026

Is the ECB’s monetary policy doomed to overshoot? 

Consequences of omitting owner-occupied housing

from the HICP

The European Union has been debating for over 20 years how to bring owner occupied housing (OOH) into the Harmonized Index of Consumer Prices (HICP) – the flagship measure of inflation used by the European Central Bank (ECB) to set monetary policy. We provide here a solution to this problem that has desirable properties and does not destabilize the HICP . We then show how our extended HICP would have helped the ECB better anticipate shocks such as the 2022 inflation by causing measured inflation to rise above the 2% target sooner. Also, our measure aligns better with the inflation experienced by households.