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- Inflation tends to slow to drift lower again when hits levels as high as right now – Deutsche Bank
Inflation tends to slow to drift lower again when hits levels as high as right now – Deutsche Bank
When inflation hits 8% throughout history, what happens next? Economists at Deutsche Bank take a dispassionate look at how inflation has evolved following previous spikes.
Should we have been so surprised by the stickiness of inflation?
“The evidence shows that once inflation spikes above 8%, median inflation takes around 2 years to even fall beneath 6%, before settling around that level out to 5 years after the initial 8% shock. This is around 2pp above the pre-shock median of c. 4%.”
“The current consensus expects us to be back at or even below 3% just two years after we initially moved above 8%. This is far from impossible, but it would be around the 25th percentile of observations through history, and around 4pp beneath the median outcome.”
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