....
Inflation rates also
remain uncomfortably high in the U.S.
and many other parts of the world despite interest-rate rises that have
gone further and been delivered more quickly than at any time since the
1980s.
There have been good reasons for businesses to raise their prices in
recent months. The supply-chain disruptions caused by the Covid-19
pandemic and the energy, food and raw-material bottlenecks that followed
Russia’s invasion of Ukraine have pushed costs higher.
But there are signs that companies are doing more than covering their costs.....
But these aren’t normal times. In rare situations—such as an
economy’s reopening after a pandemic—widespread knowledge that costs are
rising allows businesses to raise their prices knowing that their
competitors will act in the same way, according to a paper by Isabella
Weber, assistant professor of economics at the University of
Massachusetts, Amherst, and her colleague, Evan Wasner.
That is a pattern the two economists said has played out in an
analysis of recent earning calls in which executives at U.S. businesses
present their financial results to analysts.
“We do have to think about pricing differently,” said Ms.
Weber. “A cost shock, or bottlenecks can create an implicit agreement
among firms that raise their prices, so they can expect others to act
likewise.”....