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MNI BRIEF: BOC Staff Paper Sees Few Signs Of 'Greedflation'

(MNI) OTTAWA
OTTAWA (MNI)

Bank of Canada researchers found little evidence inflation was boosted by companies jacking up profit margins through the Covid pandemic, contradicting a common political complaint about grocery store chains and "greedflation."

The staff working paper reviewed industry-wide data on mark-ups against consumer price inflation, finding those two things rarely moved in tandem. Higher profits often came during Covid shutdowns when costs fell faster than sales -- a time when inflation was tumbling rather than taking off. There was also no consistent run-up in margins, according to the paper released Tuesday from Ottawa.

"Our estimates suggest that markup growth accounted for less than one-tenth of inflation in 2021. Furthermore, by 2022, when inflation reached its highest levels in recent history, growth in markups was near zero or negative," according to the paper by Panagiotis Bouras, Christian Bustamante, Xing Guo and Jacob Short. They said their findings were consistent with other recent works, and with past evidence firms smooth out price changes over time or in anticipation of future changes in costs.

Some political leaders have called the Bank's ten interest-rate hikes misguided because inflation is driven by corporate greed and the tightening will hurt workers during a subsequent recession. (MNI INTERVIEW2: BOC Overdoing Hikes, UWO's Williamson Says)

MNI Ottawa Bureau | +1 613-314-9647 | greg.quinn@marketnews.com
MNI Ottawa Bureau | +1 613-314-9647 | greg.quinn@marketnews.com

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