Central banks are turning their attention to companies using high inflation as an excuse to boost their profit margins, warning that businesses’ price gouging risks triggering persistent cost pressures.
The focus on fatter profit margins marks a shift among policymakers who have been concerned about the risk of 1970s-style wage-price spirals, in which companies have to raise prices to cover increasing employee costs. She adds: “Corporations, particularly those in the energy and food sectors, have caused inflation by using supply bottlenecks as a cover to hike up their prices.”
“When companies set prices, I understand that they have to reflect the costs that they face,” Mr. Bailey told the BBC. “But ... we do expect inflation to come down sharply this year.” With semiconductor chips in short supply, companies focused on producing larger cars, as well as more electric vehicles. These are more expensive and profitable, as they can be sold to richer, less price-sensitive consumers.
The big question now is how long businesses will continue to raise their prices by large increments as energy costs and the price of other feedstocks fall back.