U.S. Federal Reserve to keep rates high due to inflation fuelled by corporate greed: Investors

Soaring corporate profits are a big part of the inflation problem, and keeping interest rates high is the best way to rein them in, according to Bloomberg’s latest poll of professional and retail investors.

Some 90 per cent of 288 respondents in a Markets Live Pulse survey said companies on both sides of the Atlantic have been raising prices in excess of their own costs since the pandemic began in 2020. Almost four out of five said that tight monetary policy is the right way to tackle profit-led inflation.

One of the worst bouts of inflation in decades has spurred a search for explanations – with broken supply chains, big-spending governments and rising wages all shouldering some of the blame. But the surge in corporate markups is another potential cause that deserves attention, and is now getting it.

Margins soared in the initial pandemic years, and have defied convention by remaining historically high since then. That raises two key questions: Are fatter profits helping to entrench inflation, and if so, what should be done about it? It’s part of a wider debate about whether different kinds of price pressures need different tools to address them, instead of the one-size-fits-all response of higher interest rates.