Euro Area—Introducing Our Nearcast Model for Inflation

We launch a new bottom-up Euro area inflation model that incorporates information from over 600 domestic and global price-related variables and is able to provide an updated near-term inflation forecast (or "nearcast") on a daily basis. The model consists of three steps: first, a large dynamic factor model (DFM) of cost pressures using all non-HICP variables (surveys, commodity forwards and hard price data); second, input-output tables are used to compute HICP component-specific cost indices as weighted averages of the estimated upstream cost pressures;