Rising profits are driving inflation, UBS economist says
Rising profits are driving inflation, UBS economist says
BY TOBIAS BURNS - 11/02/22 11:47 AM The Hill
https://thehill.com/policy/finance/3715725-rising-profits-are-driving-inflation-ubs-economist-says/
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Ahead of another expected interest rate hike from the Federal Reserve, a top economist at Swiss bank UBS is warning that high inflation is more the result of rising profits than wages and that Fed Chairman Jerome Powell needs to explain exactly how he thinks higher rates are going to bring down rising prices for consumers.
“Powell’s public remarks offer little insight into how he expects higher rates to tame inflation,” UBS Global Wealth Management chief economist Paul Donovan wrote in the Financial Times on Wednesday.
“The omission matters as the current policy tightening will have an impact through an unusual route. That is because today’s price inflation is more a product of profits than wages,” Donovan added.
Corporate profits have soared during the recovery from the global shutdowns caused by the coronavirus pandemic, with private sector giants from the energy sector to the financial sector posting huge gains. JPMorgan Chase & Co. pulled in a 30 percent profit margin in the third quarter.
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