Rich countries are living beyond their means and rich companies are overcharging customers, says the deputy head of the IMF. Western finance ministries are therefore going to have to rein in deficits, and successful firms – whose margins have “shot up” in the past two years – will have to accept slimmer ones. The alternative, Gita Gopinath told the European Central Bank’s annual conference, is stubbornly high global inflation driven partly by a continuing wage-price spiral. “If inflation is to fall quickly, firms must allow their profit margins… to decline and absorb some of the expected rise in labour costs,” Gopinath said. Her remarks will strengthen the view that what’s driving much of Europe’s inflation is in fact a price-wage spiral rather than the other way round. UK supermarkets insist they’re feeling the pain of food price inflation along with their customers, but “margin recovery” is conspicuous in the hospitality sector and corporate profits are up across most sectors in the eurozone and the US. Gopinath said central banks will need to raise base rates (again) before lowering them. Brace, brace.