Corporations are a lot more willing than usual to raise their prices lately, and it’s putting more of the burden of high inflation on consumers.
That may not come as much of a surprise to anyone who has browsed a grocery aisle, kicked the tires at a car dealership or filled up a gas tank of late, but even the Bank of Canada is starting to take notice of the trend, as the central bank continues its battle to wrestle inflation into submission.
Speaking to a parliamentary committee in Ottawa this week, the bank’s governor, Tiff Macklem, told lawmakers that the bank has noticed a troubling new trend coming out of the corporate sector.
For much of the past few decades, any time businesses have seen a jump in their input costs — the amount they pay for things like raw materials, energy and even workers — “they were pretty cautious about passing on [that cost into] the prices they charged for goods and services,” Macklem said.
Their reasoning was simple: they were afraid of losing customers.
It’s the inevitable conclusion of allowing oligopolistic conditions to be formed.
With enough competition, companies are afraid of that one competitor who doesn’t raise their prices. This limits their price increases to actual cost increases instead of higher profits.