Corporations are a lot more willing than usual to raise their prices lately, and it’s putting more of the burden of high inflation on consumers.

That may not come as much of a surprise to anyone who has browsed a grocery aisle, kicked the tires at a car dealership or filled up a gas tank of late, but even the Bank of Canada is starting to take notice of the trend, as the central bank continues its battle to wrestle inflation into submission.

Speaking to a parliamentary committee in Ottawa this week, the bank’s governor, Tiff Macklem, told lawmakers that the bank has noticed a troubling new trend coming out of the corporate sector.

For much of the past few decades, any time businesses have seen a jump in their input costs — the amount they pay for things like raw materials, energy and even workers — “they were pretty cautious about passing on [that cost into] the prices they charged for goods and services,” Macklem said.

Their reasoning was simple: they were afraid of losing customers.

  • intensely_human
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    1 year ago

    Yes exactly. They discovered that they (now) can push it a lot further than before. Their desire to isn’t new; the opportunity is.

    So the question is, what changed about the businesses’ environment that allows them to raise prices?

    In my worldview these two are big factors:

    • Pandemic lockdowns killed lots of businesses. Business assets and market share were consolidated as big survivors swallowed the remains of small failures. “Failures” is a bit harsh considering the circumstances; I only mean it in the technical sense: not able to continue, so they sell.
    • Pandemic lockdown mitigation in the form of huge quantities of cash pumped into stock market created a huge pool of cash in rich peoples’ portfolios, and over time it seeps into the active economy diluting the value of money