Daily Management Review

Deutsche Bank analysts warn of global stagflation risk


The world's growing geopolitical dangers could cause stagflation on a scale not seen since the 1970s and drastic shifts in inflation expectations, according to Deutsche Bank analysts Henry Allen and Cassidy Ainsworth-Grace.

Can Pac Swire
Can Pac Swire
All seven G7 nations continue to have above-target inflation; the question is how long this excess will last. Experts predicted that central banks will have a harder time reestablishing price stability as a result of the destabilization of inflation expectations.

"With inflation still above pre-pandemic levels, it is important not to be complacent about its future trajectory," they stated. "Ultimately, it will be harder to imagine long-term inflation expectations that are continuously lower than real inflation if there is another shock and inflation exceeds goal for the third or even fourth year in a row."

In the meanwhile, experts say, inflation expectations are stable for the time being. In addition, within the past 18 months, commodities prices have decreased dramatically. However, the bank analysts stressed that this is not a justification for a premature easing of monetary policy.

source: reuters.com