Big Consumer Companies Keep Raising Prices, Complicating Fed’s Job

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Some of the largest consumer brands in the country have continued to raise prices aggressively this year while raking in large profits, posing a tough problem for the Federal Reserve as it aims to tame inflation. Coca-Cola, PepsiCo and Unilever have each reported raising prices significantly in the second quarter, from about 8 percent at Unilever to 15 percent at Pepsi. The price increases powered sales growth last quarter, keeping earnings strong even as the volume of products they sold either went down or remained flat versus the same period last year. The companies raised their full-year forecasts for various measures, pushing up their share prices. The Fed’s main tool to tackle inflation is raising interest rates, which reduces demand for goods and services. But food prices can be particularly sticky: Unlike other goods, food is something that consumers cannot stop buying, and food prices are particularly sensitive to external factors like supply shocks, ingredient prices and geopolitics. Escalating Russian attacks in Ukraine and the recent breakdown of a deal to export grain from Black Sea ports have put pressure on prices for key commodities like corn and wheat. “The Fed really has no ability to resolve those issues,” said David Ortega, a food economist at Michigan State University.