Profit inflation? The result of accommodative monetary policies

“Europe has passed from supply inflation to profit inflationbut it happened because the sharp increase in demand after the pandemic, supported by very accommodating fiscal and monetary policies, prompted companies to pass increases in the prices of energy goods downstream, causing a reduction in real wages. It is not the result of a sudden and arbitrary behavior of entrepreneurs, but of particular market conditions that have arisen and that only the continuation of monetary tightening can rebalance in favor of wages”. Guido Ascari, economist at the University of Pavia and economic consultant of the Dutch Central Bankhe explains to the Sheet why the ECB needs to keep raising interest rates and why brand the fight against inflation as a “dangerous choice” to the detriment of families and businesses (this is what the Minister of Infrastructure, Matteo Salvini, said yesterday in response to the speech by President Christine Lagarde at the Sintra forum in which she anticipated future hikes) makes little sense. In fact, exactly the opposite is true. “Further tightening of monetary policy at the moment serves precisely to give room for wages to rise and profits to fall, that is, to return to an equilibrium in the division of the pie”, observes Ascari.