Profit now key driver of inflation, BIS research finds
Recent surge in prices “fundamentally different” to that of the 1970s
Firms’ profits played a central role in driving the recent surge in inflation and this may require a different response from policy-makers, new research finds.
Enisse Kharroubi and Frank Smets of the Bank for International Settlements say the post-Covid surge in prices was “fundamentally different” to that of the 1970s, even though both were triggered by commodities shocks. Their working paper cites empirical evidence that while unit labour costs were the main drivers of inflation in the 1970s
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