Rampant U.S. inflation has passed the point of no return

According to a new report from Deutsche Bank analysts, rampant inflation in the United States, at its highest in 40 years, has passed the tipping point.

Inflation

John Stepek for Bloomberg News:

If you hope, as many in the markets apparently do, that inflation is still essentially “transient”, I have bad news: we have already passed the point of no return.

This was stated in a new report by Deutsche Bank analysts, led by Jim Reid. The team looked at 318 different occasions since 1920, in both developed and emerging markets, where inflation had risen above 8%. On average, inflation then took “about two years to even fall below 6%, before stabilizing around that level five years after the initial 8% shock.”

Given that analyst consensus currently expects inflation to fall significantly and faster than that, there is room for disappointment, to put it lightly. To make matters worse, Deutsche’s team found that the inflationary periods of the postwar and 1970s were even stickier. There is essentially no episode where inflation has dropped to the extent analysts are hoping for this time around.

The 1970s were certainly a period of particularly severe inflation, but as the report points out, it is also the most representative of the monetary and fiscal regime we live in today. “There was no precious metal like gold to anchor the currency and prevent politicians from engaging in inflationary policies,” the analysts write.

MacDailyNews takes: Yay.

It is best to control inflation, if you know how, while you can. – MacDailyNews, May 11, 2021

Stopping the misleading crusade against domestic energy production and profligate federal spending and inflation will stop suddenly. It is not difficult. – MacDailyNews, May 11, 2022

Again, when some neighborhoods, including the Fed, delude themselves and others that “inflation is transient” and waste at least a year before doing only part of what is needed (interest rate hikes), you pay the price for being delusional and late.

It will be difficult to recover. But, hey, good luck with that soft landing. ? – MacDailyNews, September 13, 2022

In January, Interactive Brokers founder Thomas Peterffy said of the US Federal Reserve: “If they really want to stop inflation, they should raise rates to 4%, 5%, 6%.”

The Fed’s current target interest rate range is between 3.00% and 3.25%. Peterffy may have been too conservative. At this point, rates of more than 6% may be required. – MacDailyNews, October 13, 2022

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