The idea that companies have been raising prices in excess of their costs at the expense of consumers and wage earners is likely to anger the general public.Inflation fuelled by higher corporate margins tends to self-correct as companies eventually put the brakes on price rises to avoid losing market share, making it a very different beast to tame than a wage-price stampede.
Some European countries such as Greece have tabled measures to curb inflation in essential goods while France and Spain are debating similar steps. But unlike the United States, there is no official corporate margin data for the euro zone. Instead, national accounts and earnings reports from listed companies are being used as proxies to paint the inflation picture.
That's pretty much the opposite of the wage-led inflation that characterised the 1970s, an era which has become the most widely used point of comparison in the public debate about appropriate central bank policy responses, economists say. In the United States, the issue of runaway margins has been raised by former Federal Reserve Bank vice-chair Lael Brainard, who is now president Joe Biden’s top economic adviser, and Democratic senators Elizabeth Warren and Bernie Sanders.
In January, Portuguese central bank governor Mario Centeno was among the first to warn about the risk of a very clear increase in profit margins, saying it should be brought up the European policy agenda.