I may be tired or dumb, but your argument sounds circular to me. Of course the ECB won't insist there is no inflation if they themselves have defined housing to not be included in the definition they use to measure inflation. This doesn't mean that the parent commentator is wrong nor does it imply that ECB is correct in their definition. For most people, housing is a significant cost in day to day life, and will of course be felt as inflation, regardless of how it's defined and measured in monetary policy.

If it were up to me, housing should also be included in the definition of inflation. That would be a good way to lay bare the downsides with an aggressively expanding monetary policy.

It is not a circular argument to show that a statement is not correct: ECB never said there is no inflation in the first place. ~2% is not "no inflation"; 2% is the target that the ECB aims at.

In addition to that, I added an explanation why such a number seems lower that you could expect.

Please note that ECB does not define the HICP, the European Commission does it: https://ec.europa.eu/eurostat/web/hicp/faq

Well if house prices have indeed doubled in 10 years then that means inflation during that period was about 7.2%, not 2% as they claim. Saying inflation is 2% instead of 7% can be seen as "insisting there's no inflation".

I.e. the statement was a bit of hyperbole to indicate that the ECB is hiding or misrepresenting the real rate of inflation.

And without more detailed info, hiding/excluding inflation increases in one of the biggest expenses that people have to account for in their daily life seems like confusion of the highest order.

Residential real estate for owner-occupiers is rarely a cash-based sector. The vast majority of owner-occupier buyers will get a mortgage.

That means that in this industry it makes more sense to look at the cost of the mortgage, than the cost of the home.

Particularly because a home is an asset, like a stock in a company. The fact it goes up in price isn't 'inflation' in the sense of the consumer price index (i.e. prices for consumption).

What is more relevant to measure as part of inflation in the sense of consumption, are the monthly costs around housing, regardless of the price of the underlying asset. For example, if interest rates went to 30%, and housing prices dropped sharply because of reduced financing capacity, we would not say that housing got cheaper or more affordable. We'd rightly look at monthly housing costs and saw that due to 30% interest rates, it got a lot more expensive.

So it makes little sense to say 'prices doubled, so inflation is 7.2%'. You'd have to look at monthly housing costs, which have not risen that much, due to interest rates dropping over time. For example, a 300k home in the US (interest rate 3.5%) costs as much (read: same monthly payments) over 30 years as a 485k home (60% more expensive) at 0% interest rates like in Denmark. So it makes sense that in a world where interest rates are dropping, you can see home prices go up much faster than housing costs / monthly payments / interest rates.

If you look at it from purely a cost-perspective (excluding principal paydown, as it's only a negative a cashflow, but not an expense), the difference in monthly costs between e.g. 0% and 3% becomes even bigger, allowing for even larger price differences that don't translate into monthly cost differences.

"ECB is hiding or misrepresenting the real rate of inflation." ECB has no role on that, which as I said was in favour of including house prices in the HICP. It is the European Commission deciding on that: https://ec.europa.eu/eurostat/web/hicp/faq

Please note that "H" stands for "harmonized", and that is one of the issues. If you change how the HICP is defined, then all the countries should produce the new indexes that should be included, with the same methodology. That is a challenge and a national political issue too in some cases.

> Well if house prices have indeed doubled in 10 years then that means inflation during that period was about 7.2%, not 2% as they claim.

A rise in the price of one thing does not mean that rate is the rate of inflation - relative price shifts happen.

> it does not take into account owner-occupied housing (OOH) prices

It does however take into account rental prices, which exceed owner-occupied housing costs. So the idea that housing cost inflation is fully absent from EU inflation numbers (not you that's saying it, but sometimes implied in various discussions) isn't quite true, either.

Housing costs as a percentage of income for owner-occupiers hasn't risen all that much due to the low interest rates, and is below peaks we saw in the past. Even in nominal figures, due to lower rates, monthly payments are lower too (ceteris paribus). I don't think including OOH costs would massively increase inflation the way people think, at least not if looked at from a cost-perspective. (i.e., interest, maintenance, taxes, hoa etc).

For example, the total payment on a 300k home with 3.5% rates (like the US) vs 0% rates (like Denmark) is 485k vs 300k. That means in the US you could bid 60% more in a world where interest rates dropped to 0% overnight, while having no change in your total costs. That's what's happening in much of Europe: home prices rising purely due to lower interest rates, without necessarily increasing monthly housing costs, for owner-occupiers.

For renters, different story, but that's included in the inflation figures already.

You are right, thanks for specifying it.