Regulatory reforms in network industries such as telecommunications and energy are likely to result in downward pressure on euro zone inflation over a long period, the European Central Bank said today.
This "temporary" dampening effect on inflation is likely to last as long as the regulatory reform process itself plus the adjustment period required by industries and households, it said.
The ECB said monetary policymakers need to monitor regulatory reforms closely to assess the timing and extent of downward effects on inflation.
Electricity prices have also fallen as regulators have adjusted price caps downwards.
"This falling trend in electricity prices is likely to continue over the next few years," the central bank said.
Between 1999 and 2000 the combined price decreases in the telecoms and electricity sectors directly reduced overall European inflation by 0.1 percentage point, but this may be an underestimate because of time lags in the inclusion of new products and outdated index weightings in some countries, the ECB said.
AFP