According to a new report from Deutsche Bank analysts, rampant U.S. inflation, running at 40-year highs, has passed the point of no return.
John Stepek for Bloomberg News:
If you’re hoping, as many in markets apparently do, that inflation is still basically “transitory,” I have some bad news: we’ve already passed the point of no return.
That’s according to a new report from the Deutsche Bank analysts, led by Jim Reid. The team looked at 318 separate occasions since 1920, across both developed and emerging markets, where inflation had risen above 8%. On average, inflation then took “around two years to even fall beneath 6%, before settling around that level out to five years after the initial 8% shock.”
Given that the analyst consensus currently expects inflation to drop back significantly further and faster than that, there’s room for disappointment, to put it lightly. To make matters worse, the Deutsche team found that post-war and post-1970s inflationary periods have been even stickier. There is essentially no episode in which inflation has dropped back to the extent that analysts are hoping for this time.
The 1970s was admittedly a period of particular severe inflation, but as the report points out, it’s also the most representative of the monetary and fiscal regime we inhabit now. “There’s been no precious metal like gold anchoring the currency and stopping policymakers from embarking on inflationary policies,” the analysts write.
MacDailyNews Take: Yay.
‘Tis best to get a handle on inflation, if you know how, while you still can. – MacDailyNews, May 11, 2021
Stop the misguided crusade against domestic energy production and profligate federal spending and inflation will be stopped dead in its tracks. It’s not difficult. – MacDailyNews, May 11, 2022
Again, when certain quarters, including the Fed, delude themselves and others that “inflation is transitory” and waste at least a year before doing a mere portion of what is necessary (interest rate hikes), the price will be paid for being delusional and late.
Catching up will be difficult. But, hey, good luck on that soft landing. 🙄 – MacDailyNews, September 13, 2022
In January, Interactive Brokers founder Thomas Peterffy said of the U.S. Federal Reserve, “If they really wanted to stop inflation, they would have to raise rates to 4%, 5%, 6%.”
The Fed’s current target interest rate range is 3.00% to 3.25%. Peterffy may have been too conservative. Rates in excess of 6% may be required at this point. – MacDailyNews, October 13, 2022
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