Interview with Fabio Panetta, Member of the Executive Board of the ECB, published as an article by Eshe Nelson entitled “Are Big Profits Keeping Prices High? Some Central Bankers Are Concerned.” in The New York Times, 31 March 2023

1 April 2023

After months of fretting about whether workers’ rising pay would keep inflation uncomfortably high, central bankers in Europe have another concern: large company profits.

Companies that push up their prices above and beyond what is necessary to absorb higher costs could be fueling inflation that central bankers need to combat with higher interest rates, a policymaker at the European Central Bank warned, suggesting that governments might need to intervene in some situations.

Policymakers, long preoccupied with higher pay’s tendency to prompt companies to raise their prices, generating a wage-price spiral, should also be alert to the risks of a so-called profit-price spiral, said Fabio Panetta, an executive board member at the E.C.B.