Higher margins not wages driving inflation, data shows
ECB policymakers debated issue at Arctic retreat sources
Data may help case against more rate rises analysts

FRANKFURT, March 2 Reuters Huddled in a retreat in a remote Arctic village, European Central Bank policymakers faced up last week to some cold hard facts companies are profiting from high inflation while workers and consumers foot the bill.

The prevailing macroeconomic narrative over the past nine months has been that sharp increases in prices for everything from energy to food to computer chips were ramping up costs for companies in the 20 countries that make up the euro zone.

The European Central Bank ECB responded by raising interest rates by the most in four decades to cool demand, arguing it faced the risk that higher consumer prices would push up wages and create an inflation spiral.

But at the retreat in the Finnish village of Inari intended to give the bank39;s Governing Council a chance to delve into themes only touched upon at regular meetings, a slightly different picture emerged, three sources who attended the meeting said.

Data articulated in more than two dozen slides presented to the 26 policymakers showed that company profit margins have been increasing rather than shrinking, as might be expected when input costs rise so sharply, the sources told Reuters.

An ECB spokesperson declined to comment for this story.

It39;s clear that profit expansion has played a larger role in the…