The aim of this blog post is to describe some of the analytical issues involved in diagnosing the sources and dynamics of inflation in the euro area. The left panel of Chart 1 plots the annual headline inflation rate since 1999, while the right panel of Chart 1 plots the cumulative change in the price level. Inflation has increased very quickly since the middle of 2021, resulting in a large cumulative increase in the cost of living. Having ended net purchases under the pandemic emergency purchase programme (PEPP) in March and under the asset purchase programme (APP) in June and raised the key policy rates by a ... (full story)