European Central Bank Executive Board member Fabio Panetta said company profit margins might be having a bigger impact on inflation than is generally acknowledged, according to an interview with the New York Times.
(Bloomberg) — European Central Bank Executive Board member Fabio Panetta said company profit margins might be having a bigger impact on inflation than is generally acknowledged, according to an interview with the New York Times.
“There’s a lot of discussion on wage growth,” Panetta told the newspaper this week, according to a post on the ECB’s website. “But we are probably paying insufficient attention to the other component of income — that is, profits.”
There are sectors where “input costs are falling while retail prices are increasing and profits are also increasing,” Panetta said. “So this is enough to be worried as a central banker that there could be an increase in inflation due to increasing profits.”
Companies could be raising prices because of higher input costs now or in anticipation of future cost increases, or because they have market power that allows them to hike prices without suffering a loss of demand, he added.
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