Are wages or corporate profits to blame for stubborn inflation?

Central banks around the world have been raising interest rates in the hope of bringing inflation down.

 
Rising inflation hurts everyone in the economy, but lower-income workers are the most exposed.

It’s only natural that they would want wage increases to at least keep pace with inflation so their income isn’t going backwards in real terms.

Labor unions and workers around the world have been demanding just this.

But could these demands be shooting themselves in the foot?

Some economists have been warning of what’s known as the wage-price spiral.

That’s the theory that as worker’s wages increase that fuels demand in the economy.

It’s an issue right around the world.

Now inflation in the UK hit 6.5 per cent in May, the highest point since 1991.

So the Bank of England will be very keen to tackle this inflation, and they are obviously concerned about this wage-price spiral.

Others argue that corporate profits are to blame for the situation.

So who wins out? #featured #rba #australia #economy