'Opportunistic' corporations are fluffing inflation to 'pad their profits': report

Many right-wing pundits have been blaming President Joe Biden's economic policies for the inflation the United States has been suffering. But in reality, inflation is an international problem. And according to Investment Monitor, inflation is worse in some European countries than it is in the U.S., including Germany, Italy and the U.K.

Wall Street Journal reporter Paul Hannon, in an article published on May 3, offers some reasons why inflation persists in both Europe and the U.S. One reason, according to Hannon, could be that corporations are "opportunistically" raising their prices even though they would still be well in the black without doing so.

"Figures released Tuesday by the European Union's statistics agency showed consumer prices in the Eurozone were 7.0 percent higher than a year earlier in April — a pickup from March and more than three times the European Central Bank’s target," Hannon reports. "However, the core rate of inflation — which excludes food and energy prices — edged down to 5.6 percent in April from a record high of 5.7 percent in March. Inflation rates also remain uncomfortably high in the U.S. and many other parts of the world despite interest-rate rises that have gone further and been delivered more quickly than at any time since the 1980s."

READ MORE: U.S. inflation was even lower than expected in March: CPI

Hannon notes that there have been "good reasons for businesses to raise their prices in recent months," including "supply-chain disruptions caused by the COVID-19 pandemic" and the "energy, food and raw-material bottlenecks that followed Russia's invasion of Ukraine." The WSJ reporter adds, however, that "there are signs that companies are doing more than covering their costs."

"According to economists at the ECB," Hannon observes, "businesses have been padding their profits. That, they said, was a bigger factor in fueling inflation during the second half of last year than rising wages were."

Hannon points out, however, that "not all businesses are opportunistically boosting their margins" by raising prices. And Isabella Weber, an assistant economics professor at the University of Massachusetts, Amherst, "said that when some do, it can cause problems for others that are closer to the final consumer and are at greatest risk of facing a backlash."

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The Wall Street Journal's full report continues at this link (subscription required).