A staff analysis using the ECB’s workhorse structural model, the New Area-Wide Model, supports the view that profit margins were, and are, being used to cushion emerging price pressures.
[12]  Chart 12 Profit margins buffer upside shocks to inflation Decomposition of euro area HICP inflation based on the New Area-Wide Model II (annual rates, deviations from model-implied steady state of 1.9% in pp)  Notes: The chart presents the decomposition of euro area HICP inflation into structural shocks based on the New AreaWide Model (NAWM) II.