From relative commodity prices to economywide inflation

In the United States and the euro zone, the inflationary shock began with a rise in the relative prices of energy, other commodities, transport and semiconductors. But a rise in relative prices is not inflation - it merely reflects scarcity. All these commodities (in the broad sense) are used to produce goods. The prices of goods then rise, due to the rise in the cost of goods-producing companies’ intermediate consumption. I nflation is starting to appear at this point . It is no longer merely a matter of a rise in relative prices, although it is still limited to goods. The next step is for services prices to rise, as wages rise in response to the rise in goods prices: at this point inflation has become economywide, affecting all goods and services. Because it is inevitable that the rise in relative commodity prices will eventually turn into a rise in the prices of all goods and services, it is pointless to wait for inflation to become economywide before responding. Central banks should respond at the point whe re relative commodity prices rise.