High inflation in the United States has been caused by large corporations raising their prices above increasing costs, instead of wage increases, an opinion piece published by The Guardian has said.
The underlying economic problem facing the United States is "profit-price inflation," and corporations are using those increasing costs as "excuses to increase their prices even higher, resulting in bigger profits," said Robert Reich, a former U.S. secretary of labor, on Sunday's paper.
The U.S. Consumer Price Index in August surged 8.3 percent from a year ago, slightly down from the previous month but still at an elevated level. In response, the U.S. Federal Reserve in September enacted the third consecutive three-quarter-point rate hike.
Fed policymakers "assume that the underlying economic problem is a tight labor market, causing wages to rise -- and prices to rise in response. And they believe interest rate increases are necessary to slow this wage-price inflation," said Reich, also a professor of public policy at the University of California at Berkeley.
But this is "dead wrong," he said. Wage increases have not even kept up with inflation, so wages are actually reducing inflationary pressures, rather than causing inflation, the expert added.