inflation has averaged 1.25% since 2010

Given the decline in oil prices and, as a result, surprisingly weak headline
inflation from 2014 to 2016, the average is clearly distorted to the downside,
though. But the supporters of expansionary policy argue that the core rate
(consumer prices excluding energy and food), on which lower oil prices could, at
best, have indirect second-round effects, is also too low from their point of view.
In recent months, the core rate in Germany was fluctuating around 1 1⁄2%, up
from its long-term average of 1 1⁄4% (2000-2017). Slipping to 0.9%, the euro
zone core rate, on the other hand, has recently declined relative to its longer-
term average of around 1 1⁄2%, which, however, is no reliable comparison or
reference value, given the bubble-like price trend in the periphery from 2000 to
2007.

In the historical comparison, inflation over the past years was also surprisingly
weak in other major industrialised countries such as the USA and Japan. The
fact that wage growth has remained sluggish in the face of low unemployment
rates is seen as a key contributory factor. The inverse relationship between
unemployment rates and wage growth resp. Inflation rates is known as the
Phillips Curve. The debate revolves around the question as to whether the
flattening of the Phillips Curve – at least in its simple form – i.e. The weakening
negative relationship between unemployment and (wage) inflation is a
temporary or a permanent phenomenon.