Skip to main content

Sign up for our newsletter.

Quality journalism. Progressive values. Direct to your inbox.

Fed Chair Jerome Powell speaks during a press conference

Federal Reserve Chair Jerome Powell speaks during a news conference on November 2, 2022. (Photo: Mandel Ngan/AFP via Getty Images)

Powell Wasn't Asked a Single Question About Corporate Profits Driving Inflation

Questions from corporate media outlets focused instead on workers' wages and the job market, which the Federal Reserve is attempting to weaken with aggressive rate hikes.

Jake Johnson

Federal Reserve Chair Jerome Powell fielded questions for around 40 minutes on Wednesday following the central bank's decision to impose another large interest rate hike, but not a single reporter asked about the extent to which record-high corporate profits are fueling inflation even as companies openly boast about their pricing power.

Progressive economists have estimated that corporate profits are to blame for at least 40% of price increases during the recovery from the pandemic-induced downturn, a disproportionate contribution to the stubbornly high inflation that is eating away at workers' wages. Some have put the number at over 50%.

"Ignoring the role of profits makes inflation analyses a lot weaker."

The notion that corporate price hikes are putting upward pressure on inflation—which has myriad causes—is hardly fringe. Lael Brainard, the Fed's vice chair, acknowledged in a speech last month that "since the pandemic, significant supply and demand imbalances have coincided with large increases in retail trade margins in several sectors."

"In some sectors, the increase in the retail trade margin exceeds the contemporaneous increase in wages paid to the workers engaged in retail trade, although this is not true in food and apparel," Brainard said. "The return of retail margins to more normal levels could meaningfully help reduce inflationary pressures in some consumer goods, considering that gross retail margins are about 30 percent of total sales dollars overall."

But corporations' conscious decisions to raise consumer prices well beyond the actual costs of their goods and services didn't receive any attention during Powell's press conference.

Instead, the Fed chair and reporters from corporate outlets such as The Wall Street Journal, Fox Business, The Washington Post, and The New York Times focused on workers' wages and the labor market, which Powell is explicitly trying to weaken. Reporters also pushed Powell on the risks of recession, which he admitted are growing, and the stock market's reaction to the Fed's latest announcement.

"Despite the slowdown in growth, the labor market remains extremely tight, with the unemployment rate at a 50-year low, job vacancies still very high, and wage growth elevated," the Fed chair said during his opening statement. "Although job vacancies have moved below their highs and the pace of job gains has slowed from earlier in the year, the labor market continues to be out of balance, with demand substantially exceeding the supply of available workers."

While Powell—who has previously said one of his objectives is to "get wages down"—conceded Wednesday that he doesn't see recent wage growth as the "principal story of why prices are going up," he and other Fed officials continue to enact aggressive rate hikes that will ultimately have the effect of cutting wages and potentially throwing millions out of work.

During his remarks Wednesday, Powell made clear that the Fed intends to raise interest rates further in the coming months and keep them elevated for the foreseeable future. Any talk of pausing the rate hikes to assess their impact on the economy, Powell said, would be "very premature."

The Fed's sixth interest rate increase of the year—the fastest pace of hikes since the Volcker era—heightened already widespread concerns that the central bank is pushing the U.S. and potentially the global economy into a terrible downturn.

"The Federal Reserve's decision today to raise interest rates by 0.75% will have a direct and harmful impact on working people and our families," said Liz Shuler, the president of the AFL-CIO. "The Fed's actions will not address the underlying causes of inflation—the war in Ukraine, climate change's effect on harvests, and corporate profits."

"Working people should not be the target of lowering inflation—it should be corporations that are earning record profits," Shuler added.

In recent weeks, despite the lack of attention to corporate profits during Powell's Wednesday press conference and his previous appearances, mainstream media outlets and newspapers have increasingly highlighted the link between company price hikes and inflation that progressive publications and lawmakers have been emphasizing for months.

Earlier this week, The New York Times ran a story noting that major food companies and restaurants "have continued to raise prices on consumers even after their own inflation-related costs have been covered."

"Although food companies are prominent examples of how rapid inflation is being passed from producers to consumers, the trend is evident across a wide variety of industries," the Times observed. "Executives from banks, airlines, hotels, consumer goods companies, and other firms have said they are finding that customers have money to spend and can tolerate higher prices."

Previously, when it wasn't being ignored or waved away, the connection between high corporate profits and inflation was mocked as a fantasy. In the op-ed pages of the Jeff Bezos-owned Washington Post, columnist Catherine Rampell called the idea that corporate greed is pushing up prices a "conspiracy theory."

But as the Economic Policy Institute's Josh Bivens argued in response to Rampell's May column, "Ignoring the role of profits makes inflation analyses a lot weaker."

"As a simple matter of fact," Bivens wrote, "the rise in profits has been historic and has explained far, far more of the rise in prices over the past year than labor costs or import tariffs, and this makes it odd indeed to label calls to address this as 'conspiracy theories.'"

Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.

We've had enough. The 1% own and operate the corporate media. They are doing everything they can to defend the status quo, squash dissent and protect the wealthy and the powerful. The Common Dreams media model is different. We cover the news that matters to the 99%. Our mission? To inform. To inspire. To ignite change for the common good. How? Nonprofit. Independent. Reader-supported. Free to read. Free to republish. Free to share. With no advertising. No paywalls. No selling of your data. Thousands of small donations fund our newsroom and allow us to continue publishing. Can you chip in? We can't do it without you. Thank you.

Massive Demonstration of Support for Lopez Obrador in Mexico City

AMLO was elected in 2018 and heralded as the Bernie Sanders of Mexico

Common Dreams staff ·

Scientists Revive ‘Zombie’ Virus After 50,000 Years Trapped in Siberian Permafrost

Researchers documented 13 never-before-seen viruses that have been lying dormant, frozen in thick ice, over tens of thousands of years.

Common Dreams staff ·

'Cleaner Air Is Coming' as London Expands Vehicle Pollution Fee to Entire Metro Area

"Around 4,000 Londoners die prematurely each year because of long-term exposure to air pollution, with the greatest number of deaths in outer London boroughs," noted Mayor Sadiq Khan in announcing the expansion.

Brett Wilkins ·

'Amazing News': Historic Shark Protections Approved at Global Wildlife Convention

Up to 90% of sharks targeted by the lucrative fin trade will now be protected, said one advocate.

Julia Conley ·

'The Nightmare Materializes': Far-Right Extremist Itamar Ben-Gvir to Be Israel's National Security Minister

The Foreign Affairs Ministry of the Palestinian Authority said Ben-Gvir's elevation to national security minister could have a "catastrophic impact on the Israeli-Palestinian conflict."

Jake Johnson ·

Common Dreams Logo