By late next year, the Deutsche Bank anticipates a "significant drop."

By late next year, the Deutsche Bank anticipates a "significant drop." ...

Officials at the Federal Reserve have claimed that they will be able to increase interest rates enough to reduce inflation but not so much to prevent the economic recovery.

economists at Deutsche Bank believe the game will not work out in the same way. Federal funds rate is raising to 5% to 6% in order to keep inflation under control. The fed funds rate has risen to 0.25 percent.

In a statement, economists said rates rise, the Fed's balance sheet decrease, and the "financial upheaval that accompanies [them] will drive the economy into a serious recession by late next year.

"To do the job," says a strong than a mild recession. unemployment is expected to increase by a few percentage points in March. It totaled 3.6 percent.

"The problem is that inflation has recovered and that is here to stay," the economists said. "While we may have seen the highs right now, it will be a long time before [inflation] will return to acceptable levels near the Fed's 2% target."

According to economists, several factors will help keep inflation high.

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1. A number of the structural disinflationary forces that remained prevalent in recent decades had begun to shift even before the Covid shock hit. These include a reversal of globalization... and sweeping trends in digital in an inflationary direction...

2. Rising wages, supply-chain disruption, and rising rents.

3. Psychology has changed dramatically. [...] Sellers have become increasingly willing to pass cost increases along to their customers, and buyers are becoming more willing to absorb those price increases.

4. "While longer-term inflation expectations might still be within the neighborhood of the Federal Reserve's objective, they have generally grown. More important, historical evidence suggests that actual inflation expectations are strongly influenced by what has been happening recently. Considering the likelihood of long-term inflation expectations, we can anticipate additional significant increases in inflation forecasts over the next year."

5. "Policy measures taken by the Federal Reserve... will be slow to mitigate inflation."

According to economists, core inflation, as measured by the personal consumption expenditures price index, might last in a 4% to 5% range until 2023. That measure increased by 5.4 percent in the 12 months through February.

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