Posthaste: 'Greedflation' not to blame for rising prices, Bank of Canada research says
Companies accused of “greedflation” as the costs for goods and services hit multi-decade highs did not take advantage of inflation to raise prices more than necessary, new research from the Bank of Canada suggests, challenging recent statements made by bank officials.
The research, published on the Bank of Canada’s web site on Aug. 1, looked at the changes in cost markups by companies, with the four authors concluding that “markup growth accounted for less than one-tenth of inflation in 2021” and zero in 2022.
“We show that, counter to what we would expect if firms were using their market power to raise prices, increases in the markups of Canadian firms do not coincide with the high inflation in 2021 and 2022. Rather, the data suggest that the contribution of changes in markups to inflation was limited,” the authors of the paper said.
Some companies, especially Canada’s large grocery chains, have attracted consumers’ ire as their profits rose in tandem with inflation. Statistics Canada said the June consumer price index (CPI) showed the cost for food purchased at stores rose 9.1 per cent from the year before.
Overall, however, inflation decelerated to 2.9 per cent in June after peaking at 8.1 per cent in June 2022, Statistics Canada said, showing the bank has been making headway in fighting off rising prices.
But along the way, Bank of Canada governor Tiff Macklem has said company pricing practices have played a role in the inflation problem, echoing Canadians’ anger.
In its statement alongside the latest rate hike on July 12, the bank said price increases were persisting in parts of the economy, noting that a recent survey found “businesses are still increasing their prices more frequently than normal.” The bank added
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