Are greedy corporations causing inflation?

In the three years before covid-19, rich-world consumer prices rose by a total of 6%. In the three years since they have risen by close to 20%. People are looking for a villain—and firms often top the list. According to a recent survey by Morning Consult, a pollster, a third of Americans believe that “companies’ attempts to maximise profits” have contributed “the most” to inflation, more than any other factor by far.

It is not just the public who blame fat cats. “Recent inflation has been driven by an unusual expansion of profit margins,” Paul Donovan of ubs, a bank, has argued. A study by America’s Bureau of Labour Statistics (bls) suggests “dealer mark-up” has raised the price of new vehicles. Central bankers are getting in on the act, too. Last month Fabio Panetta of the European Central Bank said “there could be an increase in inflation due to increasing profits.” Last year Lael Brainard, formerly of the Federal Reserve, now a White House official, said that “reductions in mark-ups could also make an important contribution to reduced pricing pressures”.