In an out-of-consensus forecast, Deutsche Bank is warning of a potential crisis coming from inflation.
Inflation is likely to persist and lead to a crisis in the years ahead, according to a warning from Deutsche Bank economists.
In a forecast that differs greatly from those of policymakers and Wall Street, Deutsche issued a dire warning that focusing on stimulus while dismissing inflation fears will prove to be a mistake if not in the near term then in 2023 and beyond.
The analysis draws particular attention to the Federal Reserve and its new framework in which it will tolerate higher inflation for the sake of a full and inclusive recovery. The firm contends that the Fed’s intention not to tighten policy until inflation shows a sustained rise could have dire impacts.
“The consequence of delay will be greater disruption of economic and financial activity than would be otherwise be the case when the Fed does finally act,” Deutsche’s chief economist, David Folkerts-Landau, and others wrote. “In turn, this could create a significant recession and set off a chain of financial distress around the world, particularly in emerging markets.”
