This background note considers how competition contributes to lower inflation, despite its unsuitability as a short-term anti-inflationary tool. It explains why competition is important for optimal inflation and summarises some of the empirical evidence of this relationship. It then considers...

Inflation forecast is measured in terms of the consumer price index (CPI) or harmonised index of consumer prices (HICP) for euro area countries, the euro area aggregate and the United Kingdom. Inflation measures the general evolution of prices. It is defined as the change in the prices of a...