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Taking aim at sellers’ inflation

By Isabella M. Weber

13 Jul 2023 · 4 min read

informed Summary

  1. European policymakers have finally accepted that corporate profits are playing a big part in driving inflation higher. Now what are they going to do about it? asks Isabella Weber in PS.

MHERST – Key officials have acknowledged that profits have been a major source of inflation in Europe – a realistic position informed by facts, rather than by the economics of the 1970s. Now that they have embraced a new analysis of what’s driving inflation, the policy response should change, too.

In recent months, the European Central Bank, the OECD, the Bank for International Settlements (BIS), and the European Commission have all published studies showing that profits have accounted for a large share of inflation. But the coup de grâce for doubters came on June 26, when the International Monetary Fund tweeted: “Rising corporate profits were the largest contributor to Europe’s inflation over the past two years as companies increased prices by more than the spiking costs of imported energy.”

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