Supply chains, worker wages and the price of energy has been blamed for the current bout of high inflation. But central bankers around the world are starting to clue in to something consumers have been aware of for a while — corporations just aren't afraid to raise their prices anymore.Corporations are typically afraid to raise their prices too much for fear of upsetting their customers. But in this current era of high inflation, that's no longer the case.
But in this bout of high inflation, the bank has noticed that corporations aren't nearly as worried about doing that as they typically are. In a speech this summer, Christine Lagarde cited data from the European Central Bank she leads showing that for the 20 years leading up to 2022, corporate profits were responsible for about one-third of inflation.
"Profit-led inflation works until it does not and the point where consumers start to rebel against profit-led price increases disguised as other factors tends to be a tipping point with a sharp turn," he told CBC News in an email. Jim Stanford, an economist and director at the Centre for Future Work, says its refreshing to see central bankers start to acknowledge that corporate profits have played a disproportionate role in inflation, because for too long Canada's economic discourse has been trying to put the blame on anything but that."Tiff Macklem has been talking about so-called overheated labour markets nonstop for the last two years," he told CBC News in an interview.
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