Corporate price gouging has not been a primary driver of U.S. inflation, according to research published Monday by economists at the Federal Reserve Bank of San Francisco.

While markups for motor vehicles and petroleum products did rise sharply during the 2021-2022 inflation surge, markups across the entire spectrum of U.S. goods and services have been relatively flat during the post-pandemic recovery, the bank’s latest Economic Letter showed.

“As such, rising markups have not been a main driver of the recent surge and subsequent decline in inflation during the current recovery,” wrote the bank’s research chief Sylvain Leduc and colleagues Huiyu Li and Zheng Liu.

Inflation by the Fed’s targeted measure, the year-over-year change in the personal consumption expenditures price index, peaked at 7.1% in June 2022 and has since fallen, registering 2.7% in March.

U.S. President Joe Biden has blamed corporate greed for still-elevated prices, accusing companies of boosting profits by shrinking portion sizes but leaving the selling price unchanged, and by failing to pass on falling costs to consumers.

Fed policymakers, and many economists, say the inflation surge can be better explained by the combined effect of supply chain disruptions and a drop in labor supply during the post-pandemic recovery that occurred just as consumer demand rose.

They attribute the recent easing in inflation to healing supply chains and a rise in immigration that has added to the supply of workers, along with cooling demand amid higher borrowing costs as the Fed raised its policy rate.

Leduc and his colleagues did not refer to Biden or use the colloquial term ‘greedflation,’ but their work was a clear rebuttal of the theory that corporate profiteering has been a main cause of higher prices. Other economists, using different methodologies, have drawn similar conclusions.

“Data for the current recovery show that the increase in corporate profits is not particularly pronounced compared with previous recoveries,” the San Francisco Fed researchers wrote. “Markups also have not played much of a role in the slowing of inflation since the summer of 2022.”


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