Different causes of the lack of inflation result in different inflation outlooks for the United States and the euro zone

In the United States, the current absence of inflation despite the return to full employment results from the functioning of the labour market: full employment no longer leads to an acceleration in unit labour costs. In the euro zone, the absence of inflation despite the return to full employment is primarily a result of the functioning of the goods market: companies are not pass ing on increases in their costs to their prices. Inflation could return in the United States if a different congress or president opted for another labour market policy that were more favourable for wage earners. This could happen in the future. In the euro zone, for inflation to return, companies would have to regain pricing power, i.e. t here would have to be less competition and companies would have to move upmarket, which is not under the control of governments. It is therefore reasonable to expect to see a return of inflation first in the United States ; i t will not be so straightforward in the euro zone.