Inflation may be due to rising profit margins

Inflation may be due to rising labour costs, higher prices for energy, other commodities and other imported products, but also to companies’ determination to increase their profit margins. We look at whether (in the United States, the euro zone and the United Kingdom) this third cause of inflation due to rising profit margins is present. We see that inflation in the most recent period is well explained by costs in the euro zone and the United Kingdom, and that it is higher than what results from costs in the United States. So there is “earnings inflation” in the United States, which increases the current US inflation rate by 2 percentage points.