The paper examines the inflation dynamics and monetary policy responses in the euro area and the United States. The report examines and compares the evolution of inflation in the two jurisdictions, focusing on the evolution of headline and core inflation as well as the trends in inflation expectations. Next, the paper discusses the commonalities and differences in the factors driving inflation dynamics in the euro area and the United States. In particular, the paper delves into the debate on whether supply or demand factors caused the resurgence of inflation and continued influencing price dynamics. Third, the paper examines and compares the timing and conduct of monetary policy responses to rising inflation on the two sides of the Atlantic. Finally, we discuss the challenges that the European Central Bank (ECB) and the Federal Reserve (Fed) confront, also in light of the uncertainties brought about by the ongoing crisis in the Middle East.
The document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the Committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 27 November 2023.
This report was written by experts from CASE (Center for Social and Economic Research, Warsaw): Manuela MOSCHELLA, CASE and Scuola Normale Superiore and Davide ROMELLI, Trinity College Dublin, CASE.
