Inflation is above the ECB top allowed mark in seven of nine early reporters in December, nearly 80% if them. Through November, 92% of the central 12 members of EMU have inflation running over 2%. That compares to 80% in October and 50% in September 2007. From September 2006 to September 2007 headline inflation was at or below 2% in most of these countries. But prior to September 2006 above 2% inflation rates were more common in Euro Area member countries.

As for Core inflation, in November the core HICP was rising in 9 of 12 key EMU countries (75%). In October the core rate was above 2% in 66% of these countries and in September 50%. Before that, from September 2006 through April 2007, that percentage stayed pretty much at 42% with one tick up in the proportion to 50%.

The Core HICP for EMU did not go up above 2% until recently, in Sept. 2007. But the headline inflation rate is another story. Since February 2006, the headline HICP has exceeded 2%; in 19 of those 23 months. The core rate was up in 10 of those 22 months (a December HICP core is not yet available).

This is why the ECB is nervous. There has been a long run of the HICP above 2% while the core has only moved up there again, recently and somewhat sporadically. Core inflation is moving up now with two of the Big Three EMU economies (Germany and Italy) posting core rates above 2%. Only France, The Netherlands and Finland have core inflation persistently holding below the 2% mark.

While there is a debate about how much Europe will slow, and there is a strong euro in place to help fight inflation, the ECB is concerned about the structural entrenchment of inflation above 2%. Above 2% inflation in the core, although the ECB does not exactly say it that way, has become a problem. Just as inflation has gotten a bit more worrisome, concerns about growth have escalated as well. This leaves the ECB in no man’s land. Its response has been to take a harder rhetorical line against inflation. We’ll see if there is anything more to it than that in the coming months.