European Central Bank President Christine Lagarde said corporate earnings that are increasingly being blamed for driving euro-area inflation won’t stay as high as they are currently.
(Bloomberg) — European Central Bank President Christine Lagarde said corporate earnings that are increasingly being blamed for driving euro-area inflation won’t stay as high as they are currently.
“Profit margins are expected to weaken over the medium term owing to the monetary policy-induced easing of demand pressures, some catchup in real wages and further improvements in supply constraints,” Lagarde said in a letter to a European Parliament lawmaker published Friday.
Read More: ECB Wakes Up to Profits as Key Culprit in Inflation Struggle
“To the extent that profits arise due to insufficient competition in certain sectors, the competent competition authorities should take action to enforce prohibitions on the abuse of dominant positions and ensure the removal of undue entry barriers,” Lagarde said.
Other officials have also played down the prospect that companies’ earnings will turn out to be a permanent source of inflation. Executive Board member Isabel Schnabel has said that because consumers have to pay these higher prices, there’s “stronger self-correction.”
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