Two possible strategies if inflation results from scarcities (negative supply shocks)

Today’s inflation in OECD countries is the result of numerous scarcities - labour, energy, other commodities, transport, electronic components, etc. - resulting in a fall in the supply of goods and services. Central banks then have two possible strategies: Reduce demand for goods and services by an amount equal to the fall in supply to avoid inflation. This would require highly restrictive monetary policies; Wait for the supply of goods and services to pick up and balance demand without an increase in prices. This would require productivity gains to offset the fall in the labour supply and new production capacity for energy, other commodities, transport and semiconductors. All this will take several years, so central banks would have to tolerate high inflation without reacting for several years before it subsided as supply recovered. Moreover, in some cases (fossil fuels), this recovery in supply may not take place.