Rising Concerns of Inflation Echo 1970s Stagflation Era, Warn Deutsche Bank Economists
Geopolitical Events and Weather Patterns Drive Inflation Concerns
Economists from Deutsche Bank, Henry Allen, and Cassidy Ainsworth-Grace, expressed their apprehensions this Monday about the potential for unanchored long-term inflation expectations reminiscent of the 1970s stagflation era. Their concerns stem from various factors, including geopolitical events and weather patterns that could potentially drive up commodity prices.
Geopolitical Events and Oil Prices
The recent attacks by Hamas on Israel have led to a 4% rise in oil prices, adding to the economists’ worry. This increase in oil prices is one of the key components contributing to their concern about a possible return to a stagflation-like scenario.
Persistent Above-Target Inflation
Another factor contributing to their concerns is the persistent above-target inflation across all G7 countries. If this trend continues, managing long-term expectations to stay lower than actual inflation could become challenging.
Expected El Niño Weather Pattern
The expected El Niño weather pattern this winter is another factor that the economists have flagged. Historically, this weather pattern has been correlated with higher commodity prices. If this pattern holds true for the upcoming winter, it could add further pressure on inflation rates.
Potential Challenges in Managing Inflation Expectations
Allen and Ainsworth-Grace warn that if another shock results in inflation exceeding targets for a third or fourth consecutive year, managing long-term expectations could become significantly challenging. This would be similar to the unanchored inflation expectations seen during the 1970s stagflation era, where high inflation and economic stagnation coexisted.
Complexities in Economic Recovery and Growth
This warning from Deutsche Bank economists comes at a time when global economies are grappling with various challenges. The potential for a return to a stagflation-like scenario adds another layer of complexity to the task of managing economic recovery and growth.
Deutsche Bank’s Performance and Investment Options
Deutsche Bank has been witnessing accelerating revenue growth and consistently increasing earnings per share, making it an attractive investment option. However, analysts predict a drop in the bank’s net income this year, and it suffers from weak gross profit margins.
This article was generated with the support of AI and reviewed by an editor.
