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  • By The Financial District

Corporate Ain't Biggest Culprit For Runaway Inflation

Updated: Jun 30, 2022

Furious over rising gas and grocery prices, many customers believe they know exactly who to blame: unscrupulous corporations who continuously raise prices and pocket the profits.


Photo Insert: The blame game has only become worse as the US government stated that inflation in May was 8.6 percent higher than a year ago, the highest rate since 1981.



Responding to that sentiment, the Democratic-led House of Representatives last month passed a bill designed to crack down on alleged price gouging by energy producers on a party-line vote — most Democrats for, all Republicans against — on June 27, 2022, according to Paul Wiseman and Christopher Rugaber for the Associated Press (AP).


Similarly, Britain announced last month plans to levy a temporary 25% windfall tax on oil and gas firm earnings, with the money going to financially disadvantaged individuals.



Despite popular outrage, most economists believe business price gouging is only one of many reasons for runaway inflation, and not the fundamental one. “There are much more plausible candidates for what’s going on,” said Jose Azar, an economist from Spain's University of Navarra.


Supply delays at manufacturers, ports, and freight yards are among them. Manpower shortages. President Joe Biden's massive pandemic relief effort. China had shutdowns as a result of COVID 19.


All the news: Business man in suit and tie smiling and reading a newspaper near the financial district.

Invasion of Ukraine by Russia. Not to mention a Federal Reserve that maintained interest rates ultra-low for much longer than experts believe it should have.


Most importantly, economists believe that renewed consumer and government spending drove increased inflation. The blame game has only become worse as the US government stated that inflation in May was 8.6 percent higher than a year ago, the highest rate since 1981.


Market & economy: Market economist in suit and tie reading reports and analysing charts in the office located in the financial district.

To combat inflation, the Fed is currently actively tightening credit. On June 15, it lifted its benchmark short-term rate by three-quarters of a percent, the highest increase since 1994, and warned that additional significant rate increases are on the way.


The Fed is hoping for a famously tough "soft landing" - lowering growth enough to reduce inflation without leading the economy to enter a slump.



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