Analysis: CEOs and central bankers talk past each other on inflation

FRANKFURT/LONDON, Aug 5 (Reuters) – The bosses of top multinationals are fretting about rising inflation but the very people responsible for keeping price growth in check – central bankers – seem unfazed.

Even as policymakers at the U.S. Federal Reserve, European Central Bank and elsewhere diverge on how quickly to wind down massive pandemic stimulus programmes, they agree on one thing: the recent surge in inflation is not a major concern.

Yet the latest set of corporate earnings calls are replete with mentions of the word “inflation”, with the tally up 1,000% on the year for S&P 500 U.S.-listed companies and 400% in Europe for Stoxx 600 companies, according to Bank of America research.

The fact is that when CEOs and central bankers talk about inflation, they are mostly talking about different things. The following piece explains where they differ – and under what circumstances their interpretations could start to converge.

CEOs SEND INFLATION ‘ALARM’…

“Inflation” is the buzzword of the second-quarter earnings season as companies of all shapes and sizes grapple with price pressures stemming from pandemic-related hits to supply chains struggling to keep up with post-lockdown surges in demand.

Industrial conglomerate General Electric (GE.N), bike-maker Harley-Davidson (HOG.N), consumer conglomerate Unilever Plc (ULVR.L), car-maker Renault (RENA.PA) and pharma group Bayer (BAYGn.DE) have all been at pains to tell investors what they are doing about substantial rises in their input costs.

…BUT CENTRAL BANKERS ARE MORE RELAXED

Among big central banks, the hot inflation issue has been most pronounced for the Federal Reserve. Its preferred measure of price pressures is well above its target at 3.5%, the highest in three decades. Headline consumer inflation hit 4.5% in June.

 

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