INFLATION IS “TIME BOMB” FOR U.S. ECONOMY, DEUTSCHE BANK SAYS

The U.S. Federal Reserve and treasury department are downplaying the current inflation rate at the risk of driving the global economy into crisis, a new report by Deutsche Bank economists warns.
The vast amounts of stimulus cash being pumped into the U.S. economy while no steps are being taken to rein back inflation could too easily lead to an economic crisis by 2023 that could linger for years, Germany’s largest lender said in Inflation: The Defining Macro Story of This Decade.
In the four years following World War Two, “U.S. deficits remained between 15 and 30 percent” of GDP, the report noted. 
The U.S. annual deficit has now exceeded 100 percent of GDP, according to the U.S. Congressional Budget Office.
The U.S. Federal Reserve’s nonchalance about current inflation risks “greater disruption of economic and financial activity than would otherwise be the case when the Fed does finally act,” the bank’s analysts wrote. 
“This could create a significant recession and set off a chain of financial distress around the world, particularly in emerging markets,” the report concluded, that could leave the global economy “sitting on a time bomb.”
TREND FORECAST: U.S. Federal Reserve officials have said repeatedly that any inflation above 2 percent will be small and temporary as the reviving economy works out materials shortages and supply-chain kinks.
The Fed has vowed to not raise interest rates until the economy has, in the Fed’s judgment, restored full employment, inflation rises above 2 percent, and shows clear signals of remaining there for an extended period.
Inflation will continue to rise at a pace faster than 2 percent, especially if the U.S. dollar remains weak, forcing the Fed to raise interest rates before its currently projected 2024 target. In fact, there is a growing likelihood that the bank may raise rates this year. The decision to do so will depend on the equity markets. Should U.S. markets fall into bear territory, the Fed will keep rates low to stop them from crashing, which would continue to drive inflation faster.