Fears that Europe’s companies are exploiting high inflation to increase their profit margins have prompted a warning from the European Central Bank that it is closely monitoring potential price gouging of consumers.
Policymakers have repeatedly called for wage restraint but concerns are mounting that a bigger driver of the wave of price rises may be companies using inflation as an excuse to increase profit margins, a trend unions have described as “greedflation”.
On a day when the latest official figures showed cost of living pressures in the 20-country eurozone remained stubbornly high, the ECB said it was paying just as close attention to trends in profits as to wages.
The tough comments from the central bank are likely to increase public sympathy for workers taking action to protect living standards during the worst cost of living crisis in four decades.
Minutes of the ECB’s last meeting in early February said: “Profit growth remained very strong, which suggested that the pass-through of higher costs to higher selling prices remained robust.
“It was therefore widely stressed that developments in profits and markup warranted constant monitoring and further analysis on an equal footing with developments in wages.”
Central banks have been vocal in their determination to avoid a repeat of the wage-price spiral of the 1970s, when higher prices prompted higher wages and even higher prices.
But the ECB’s comments reflect a growing concern that companies are responding to the higher costs of fuel and raw materials by increasing their selling prices by an even greater amount.
According to a Reuters report, last week’s gathering of the ECB council was shown a slide presentation that revealed profit margins had been rising rather than
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