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The European Central Bank “discovers” that the cause of inflation is companies. Prices have increased more than costs at the expense of consumers and workers

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Many advocates of the European Central Bank, led by the Governor of the Bank of Italy Ignazio Fiesco, have repeatedly spoken out against a generalized increase in wages, despite the significant loss in the purchasing power of Italian workers, who are already among the poorest in the eurozone. . And, according to Vesco, slightly heavier payrolls will inevitably lead to an “inflationary spiral”. However, according to reports from Reuters, the picture that has emerged from the latest assessments of central bank economists is a very different reality.

The meeting took place in a very secluded place, a Finnish village Inari, Lapland. The European Central Bank travels periodically to the various euro countries to hold some of its meetings, which are usually held in Europe Frankfurt. All in all, given the subject matter so difficult to deal with, going a little bit off the radar this time around might also be helpful. In fact, the European Central Bank experts gathered for further studies and Assessments of inflation dynamics in the eurozone. The latest figure for February showed the cost of living still at 8.5% with inflation already halting growing but, for the time being, struggling to come down. And so Frankfurt takes the hard line: Further interest rate increases, higher borrowing costs e Sand in gears engine of economic growth. Many advocates of the European Central Bank, with the Governor of the Bank of Italy Ignatius Fiesco In the vanguard, they spoke again and again In exchange for a general increase in wages, despite the serious loss in purchasing power of Italian workers, who are already among the poorest in the eurozone. Slightly heavier payrolls, according to Visco, will inevitably cause this to happen “Inflationary Vortex”.

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However, according to reports from the agency Reutersthe image that appeared from Finnish session I collected another fact. Economists have so far argued that increases in the price of raw materials, components and semi-finished products, from energy to food to computer chips, Translated into an increase in business costs. But, apparently, it would have been the final price increase Much higher than the cost. So you get and corporate profits soar immeasurably, To the detriment of consumers who, moreover, are deprived of the possibility of asking for increases because that would serve inflation, which nonetheless does not depend on them. According to the data used in the study and collected From RefinitivFMCG companies in the eurozone increased their operating margins (the difference between revenue and production costs) in 2022 on average 10.7% . The 106 large companies monitored included groups such as Stellantis, luxury goods group Hermes and Nordic retailer Stockmann. And they are, according to reports From European Central Bank studies (Which, however not comment formally these conclusions), to pay them Ascending prices Inflamed inflation.

Statistical data also shows how, on the contrary, Wages grew much more slowly than inflation with a loss in the real value of wages averaging 5% compared to Until 2021. However, wages were mentioned 14 times in the last press conference of the President of the European Central Bank Christine Lagarde , while corporate profits were not mentioned. vice president Luis de GuindosHe also warned that the European Central Bank should be vigilant Unions can demand excessive wage increases. The top-down approach, remember Reuters It also causes a strong bad mood Inside the central bank whose employees work They called for adjusting wages to inflation, which has not yet reached. “niet” that prompted European Central Bank officials to talk about a Prejudice against workers Studies of the IMF’s central bank promotion show that wage increases rarely lead to higher inflation.

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“It’s clear that earnings growth has played a major role in European inflation trends over the past six months or so,” he said. Reuters Paul Donovan, Chief Economist at UBS Global Wealth Management. The European Central Bank will struggle to justify its monetary policy In a context where inflation is primarily based on corporate price lists,” he adds. Inflation fueled by higher corporate margins tends to self-correct because companies eventually have to cap themselves so as not to lose consumers. Therefore, a tightening of interest rates by the ECB would be Mostly not necessaryIt is “pain” to the economy without any benefit. Ratings formulated in Finland could provide more ammunition for so-called “doves”, ie ECB Governing Council members less inclined to increase the cost of money in the eurozone.

In the United States, where inflation reached 6.4% and the central bank began to tighten monetary policy before the European Central Bank, about a year ago, this issue was discussed for some time and in a more open way. The most recent was the Democratic Senator Elizabeth Warren.

Former economist and former White House economic advisor Robert Reich He spoke explicitly of “profit-driven price inflation” in which prices are raised
Through companies seeking higher profits by taking advantage of the situation. Ideas that have not yet been collected by the Federalists, which follow a very traditional monetary policy and are faithful to the tenets of the monetarist school. According to his analysiseconomic policy institute, Cited by Reich, in US Non-Financial Corporations, which are 75% private, i Post-Covid Prices Increased An Average Of 6.5% (against an average increase of 1.8% in the years 2007-2019) More than half of the increase is attributed to profits. Labor cost contributed just one-ninth versus the average of six-tenths in the twelve years before Covid. Recently some voices have begun to rise in Europe as well. Governor of the Portuguese Central Bank Mario Centeno He raised the issue of corporate profit margins racing, saying it should be placed on the European political agenda. Italian member of the Governing Council of the European Central Bank Fabio Panetta He pointed out that the workers have so far borne the brunt of the sharp rise in prices while The company’s margins remained stable or even increased in some sectors.

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