Could inflation fall rapidly in the euro zone? The role of scarcity and the distribution of the inflationary shock

Some economists and investors now believe that inflation in the euro zone will fall rapidly and that this will spare the ECB from raising interest rates significantly. Yet there are many structural reasons that will lead inflation to remain higher in the euro zone: Weak investment in fossil fuels, which will give rise to a chronic shortfall of fossil fuel supply relative to demand, which continues to grow; Hiring difficulties for companies, which, in the euro zone, are linked not to a fall in the labour supply (the case in the United States), but to strong sectoral mismatches between labour supply and demand; Various scarcities (metals, electronic components, transport, agricultural products) resulting from the shift in the structure of demand from services to goods, the energy transition and the sanctions against Russia; The rise in interest rates and therefore in the cost of capital, which is driving companies to increase their selling prices; The rebalancing of how the cost of the rise in commodity prices is distributed. In 2022, this cost is borne by governments and wage earners, not by companies; in the future, companies are likely to bear a larger share of the cost under the effect of faster wage and therefore price growth.