Regional Inflation Divergence in the Context of EMU

We find that regional inflation dispersion has not markedly increased since the start of EMU, although it is somewhat higher than in other monetary unions (US and Germany), and that the distribution of member states' rates of inflation around the euro area HICP inflation rate is characterised by a few outliers. In addition, an analysis based on economic weights suggests that roughly 60 percent of euro area consumer spending experiences an inflation rate that is within a range of 0.5 percentage points of the euro area HICP inflation rate. This suggests that in the first three years since the start of EMU regional inflation dispersion has not posed problems for the adoption of the single monetary policy for the majority of member states.