KC Fed, Report: Corporate Profits Contributed a Lot to Inflation in 2021 but Little in 2022—A Pattern Seen in Past Economic Recoveries

“Although inflation has been atypically high during the recovery from the pandemic, the contribution of corporate profits to inflation has not been unprecedented. Our findings support the theory that firms set prices based on current as well as future production costs, which explains the contribution of corporate profits to inflation both before and after the COVID-19 pandemic. The amount of inflation generated by corporate profits early in a recovery may be a useful signal of future cost growth and subsequent inflation.”