Feng Difan: Is the inflation of the developed economy originated from ＂greedy inflati

Source: First Finance

Author: Feng Difan

Inflation is raging, what factors are the driving?

The new word "Greedflation" in the cost crisis faced by developed economies represents a view that profit -driven inflation has occurred at the moment.

For example, large -scale supermarkets in the United Kingdom are often accused by the public or politicians, saying that supermarkets have too high profitability, and they are suspected of increasing the price to exceeding the required level.

However, more evidence provided by recent financial reports shows that the business profit margin and survey data of the enterprise show that the profit margin has been narrowed.

Oxford Economic Research Institute also wrote in the latest report that although profit has always been a factor in inflation, higher cost is a greater driving factor.

"So far, we believe that the scale and visibility of cost shocks since 2020 have enabled many companies to increase prices rather than compressed profit margins, because they know that competitors will do so.Compared with the epidemic, customers have a higher tolerance for rising prices. "Ben May, the head of macroeconomic research in the Oxford Economic Research Institute, told the first financial reporter:" As the bottleneck relief, cost pressure, and economic growth have been releasedSlowly, we expect profit margins to narrow and help relieve inflation pressure. But events that have occurred in the past three years may have a longer -lasting impact on the pricing behavior of the enterprise. "

Mei also explained that from the mid -term perspective, if the price is more sensitive to the cost of cost than before, and the unfavorable supply shock is still commonplace, so inflation may be more unstable than 20 years before this century.This may also mean that policy interest rates have greater cyclical fluctuations.

Greed inflation or cost shock?

Taking the UK as an example, as a fight against inflation, the Bank of England announced the interest rate hike again last week, raising the benchmark interest rate by 25 basis points from 4.25%to 4.5%before.This is the 12th continuous interest rate hike since the end of 2021. The Bank of England stated that if inflation pressure continues to raise interest rates.

In this round of global response to inflation, Britain can be said to be one of the earliest developed economies to start the interest rate hike process.However, although the benchmark interest rate has increased from 0.1%to 4.5%, this strategy has not worked.

According to data from the British National Bureau of Statistics, the consumer price index (CPI) in March increased by 10.1%year -on -year, and the British CPI data remained at a double -digit increase for seven consecutive months.The Bank of England believes that rising food prices are important reasons for the delayed inflation, and the process of reducing food price inflation is slower than previous expectations.

Due to the closely related price of supermarkets and food, many people set their blame at the retail industry.However, data recently released by large supermarkets in the UK show that its profit margins are declining.

Taking the British's largest grocery retailer Tesco as an example, in the just -concluded fiscal year, its operating profit of British retail business has dropped by 7%. The company's expected fiscal profit will be "generally the same."

The second -ranking Sainsbury ’s said that at the just end fiscal year, the profit of basic taxes fell by 5%, and like Tesco, it is expected that this year's profit growth will be flat.

In fact, as far as Britain is concerned, the reason why its high inflation rate is more stubborn is more reflected in cost.First of all, British food has relied on imports in large quantities. Second, since 2004, Britain has been a net importer of energy, and it is more likely to be affected by rising energy prices.

The Oxford Economic Research Institute stated in the report that many discussions have recently focused on the following topics, that is, high -level corporate profits have led to the continued high inflation of developed economies -the so -called "greedy inflation".

However, according to its estimates, the proportion of non -financial enterprises' profit in the United Kingdom accounted for a slightly higher long -term average in 2022.But this reflects the increase in profits in the energy industry.If energy data is excluded, the proportion of profits accounts for GDP is at the lowest level since 2009.

In the euro area, the overall economic profit data from the national account shows that the profit margin has soared to the highest level since 2008 in the second half of 2022. However, if the rise is accurate, it may be a one or two industries such as energy.The profit is soaring.

The Oxford Economic Research Institute believes that survey data from the euro zone and Britain confirms that the decline in profit margins may continue.

inflation falls slower than expected

Mei said: "Overall, we believe that profits are not the main inflation driving factor of any developed economy. The compression of profit margins may have begun to help relieve inflation pressure."

He explained that the mild response to inflation so far reflects such a fact, that is, the soaring energy cost has drowned any positive impact caused by the compression of profit margins.

"We believe that the incident in the past three years may mean that the fall of inflation is slower than expected. There are two reasons: First, if the profit margin is compressed, the cost of the entire industry has continued to rise, and it is before the epidemic.Compared with, companies may be more willing to increase more costs to customers. After all, many companies have reported that so far, in the face of price shocks, demand is still good. "Mei said," Secondly, inflation is higher than the normal level of expectations than normal levels.It may become a prophecy of self-realization. Although we think that the possibility of "salary-price" spiral rising is not high, or the mid-term inflation expectations are no longer anchored, the recent power is likely to make the salary price last for a period of time. If the enterpriseIt is expected that the inflation rate will remain on the goal in the next few years, so they may reduce the increase in investment costs and prepare to pay the salary higher than the normal level to retain employees because they are expected to impact costs to customers. "

In this case, the possibility of "perfect currency tightening" -the overall inflation rate rising to the target level -will be reduced.Mei explained that in the case of slow decline in inflation, the central bank can acquiesce and slowly transition, or design a weak economic environment to help suppress potential price pressure.

"We think the radical interest rate hike so far, and the pressure of the banking industry in the past few months, may mean that policy makers will be cautious about further interest rate hikes." Mei said to the First Financial reporter: "But but Mei said," But but the reporter of the First Financial said: "But but the reporter of the First Financial said:" But the first financial reporter: "But the first financial reporter:" But the first financial reporter: "But butAt the same time, we also think that the threshold for interest rate cuts is much higher than market expectations, and the core inflation rate is still high. "

"After the next few years, we still think that inflation is likely to return to the target level." He said, however, if the epidemic marks a period of abnormal mild cost impact and the end of a wider and stable period, and the company is more inclined to tend toIn the transmission of shocks and use fluctuations to expand profit margins, then inflation may be more unstable than 10 years before the big popularity, which may also lead to greater cyclical fluctuations in policy interest rates.

Ruchir Agarwal, a senior economist at the IMF Research Department, stated in an article that specifically discussed inflation and the central bank's relationship in recent posts that how long the current inflation will last, first of all, it depends on the following two aspectsInteraction, on the one hand, the tension of the labor market and the duration of the bottleneck of the supply chain, on the other hand, is the central bank's response measures.

Agavar and others believe that if history is used as a reference, we will not experience inflation out of control in the next few years.(But some countries may lose their "blue chips" state, which is due to large extent that inflation has risen during the epidemic.) However, some cases may be accurate.

Agavar wrote, first of all, considering the long -term impact of the epidemic, the uncertainty of the recovery, and the globalWith high inflation cope with the temptation of high debt, the central bank's disgusting attitude towards inflation may be suppressed. "It can be seen through the standard Taylor rules that some countries need to raise interest rates to more than 7%to reduce inflation."