Companies Push Prices Higher, Protecting Profits but Adding to Inflation

The prices of oil, transportation, food ingredients and other raw materials have fallen in recent months as the shocks stemming from the pandemic and the war in Ukraine have faded. Yet many big businesses have continued raising prices at a rapid clip.

Some of the world’s biggest companies have said they do not plan to change course and will continue increasing prices or keep them at elevated levels for the foreseeable future.

That strategy has cushioned corporate profits. And it could keep inflation robust, contributing to the very pressures used to justify surging prices.

As a result, some economists warn, policymakers at the Federal Reserve may feel compelled to keep raising interest rates, or at least not lower them, increasing the likelihood and severity of an economic downturn.

“Companies are not just maintaining margins, not just passing on cost increases, they have used it as a cover to expand margins,” said Albert Edwards, a global strategist at Société Générale, referring to profit margins, a measure of how much businesses earn from every dollar of sales.