Inflation Measurement: Role of Owner-Occupied Housing Costs

The harmonised index of consumer prices (HICP) is the measure used by the European Central Bank (ECB) to define its price stability target and guide policy. As such, it needs to relate closely to the actual inflation that households in the euro area are experiencing. Housing costs, an important part of household expenditures, are currently included in the HICP index through rental costs and only some minor elements of owner-occupied housing (OOH) costs. In July 2021, the ECB Governing Council recommended a multi-year roadmap to include OOH costs in the HICP. Four papers were prepared by the ECON Committee’s Monetary Expert Panel, discussing the conceptual, technical and policy aspects of integrating OOH costs into the HICP. This publication is provided by Policy Department A for the Committee on Economic and Monetary Affairs (ECON), ahead of the Monetary Dialogue with ECB President Lagarde on 15 November 2021.