Lagarde highlights tit-for-tat inflation dynamic

Published date23 March 2023
This should have come down with the reopening of supply chains but has remained stubbornly elevated, a trend he associated with increased corporate profits

Yesterday his boss Christine Lagarde also raised the notion of companies profiteering on the back of inflation, warning that a "tit-for-tat" dynamic between companies and workers was threatening to keep price growth higher for longer.

"So far, we do not see clear evidence that underlying inflation is trending downwards," she said. However, Lagarde noted there were two forces pushing underlying inflation in different directions.

Lower energy prices are pushing inflation down but stronger-than-expected domestic demand is offsetting this, as firms increase profit margins and workers push for higher wages in tight labour markets.

She wasn't exactly warning of a wage-price spiral but gently alluding to one. Policymakers in Europe and the United States are confident inflation is coming down but the headline barometers have yet to reflect this confidence.

Last month Irish inflation unexpectedly ticked up while UK inflation was yesterday reported at 10.4 per cent in February, up from 10.1 per cent in January, pushed up by higher food and drink prices in...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT