baoThe increase in firm profits in the recent inflation episode has been catching the attention of economic commentators and policy makers across advanced economies. Despite some cross-country heterogeneity, there has been a pattern of profits per unit of output (unit profits) being an important counterpart to the increase in the GDP deflator in advanced economies over the past two years. Policy makers have consequently pivoted in their communication to highlight the role of profits for inflation along with the role of unit labor costs. For example, ECB executive board member Philip Lane in an interview with Reuters pointed to “extraordinary unit profits”, and ECB executive board member Fabio Panetta raised the risk of a profit-price spiral in a New York Times interview.2 Former IMF chief economist Olivier Blanchard has pointed out that distributional conflict – be it driven by strong aggregate demand or the initial desire of one economic actor to increase relative prices relative to others – can generate inflationary processes.gaoting.com/info/463121