Deutsche Bank's 4 reasons to be concerned about resurgent inflation

<p>DB says that inflationary pressure is receding:</p><ul><li>central bank tightening</li><li>supply chain pressures have diminished </li><li>commodity price inflation has subsided</li></ul><p>But, say the analysts, now is not the time to become complacent, urging caution. Outlining 4 reasons to be wary of an inflation resurgence:</p><p>1. Above target inflation persists in every G7 country</p><p>2. With CPI above target for two and more years a new price shock could easily unanchor inflation expectations</p><ul><li>"If there is another shock and inflation remains above target into a 3rd or even a 4th year, it is increasingly difficult to imagine that long-term expectations will repeatedly stay lower than actual inflation" </li></ul><p>3. Sluggish economic growth with policy tightness hitting the economy</p><ul><li>bonds yields surging</li><li>higher-for-longer</li><li> US debt-to-GDP soaring, limiting the prospect for fiscal stimulus</li><li>sticky inflation limiting the scope of monetary policy to provide stimulus</li></ul><p>

4. Risk the Fed could overdo tightening due to lags in policy impact, perhaps sending the US into recession</p><p>One of these is not at risk of over tightening</p>

This article was written by Eamonn Sheridan at www.forexlive.com.