Deutsche’s economists warn against potential global inflation crisis
In an out-of-consensus forecast, Deutsche Bank economists have warned that inflation is likely to persist in the coming years and subsequently lead to a crisis while dismissing inflation fears will prove to be a fatal mistake.
The analysis is against the Fed’s intention not to tighten policy until inflation shows as it claims this would have detrimental impacts on the economy. The firm contends the Fed’s new framework in which it plans to not raise interest rates or seize asset purchase programs until it witnesses a full and inclusive recovery. Even though the Fed is anticipating “substantial further progress” with its new framework to tolerate higher levels of inflation, multiple central bank officials have said that they are not near those objectives.
“The consequence of delay will be greater disruption of economic and financial activity than would otherwise be the case when the Fed does finally act. In turn, this could create a significant recession and set off a chain of financial distress around the world, particularly in emerging markets”, Deutsche’s chief economist, David Folkerts-Landau, and others wrote.