Tuesday, May 21, 2024
Year : 2, Issue : 21
President Biden and other Democratic lawmakers have frequently blamed corporate price gouging for chronic inflation that has Americans paying more for everyday necessities.
But new research published by the Federal Reserve Bank of San Francisco suggests that corporate greed is not a primary driver of the inflation spike that began in early 2021.
Although some companies jacked up prices after the COVID-19 pandemic – markups surged for things like gasoline and cars in 2021, for instance – the researchers found the overall markup rate has generally remained flat, consistent with previous economic recoveries over the past three decades.
“These patterns suggest that markup fluctuations have not been a main driver of the ups and downs of inflation during the post-pandemic recovery,” wrote Sylvain Leduc, Huiyu Li and Zheng Liu in the bank’s weekly Economic Letter.
At the end of February, the White House launched a new task force that is intended to take on “unfair and illegal” corporate pricing, which Biden has blamed for the frustratingly high price of groceries.
While corporate profits did rise after the pandemic, the San Francisco Fed researchers said they are “typically volatile” and frequently rise in the early stages of economic recoveries. Data for the current recovery shows that the increase in corporate profits is “not particularly pronounced compared with previous recoveries,” which did not experience high inflation.
Prices for everything including groceries, new cars and health insurance surged in 2021 and 2022 as the result of rampant inflation that many economists – including the San Francisco Fed – agree was caused by supply chain disruptions, an extremely tight labor market and increased consumer demand fueled by trillions in stimulus money.
While inflation has fallen considerably from a peak of 9.1%, it remains well above the Fed’s 2% goal. And when compared with January 2021, shortly before the inflation crisis began, prices are up a stunning 19.4%.
Source: Fox Business
