Euro Area Inflation Differentials Could Threaten Financial Stability
Inflation rates can vary between different regions in countries that use the same currency, like the euro area. This can happen for various reasons, like prices adjusting or differences in economic conditions. The European Central Bank can't always control these differences with its usual tools, but other measures can help reduce the gaps and make sure monetary policy works well everywhere. It's important to keep average inflation close to two percent to avoid problems like deflation in some areas, which could harm the whole region's financial stability.