“Few still remember how our societies and economies were threatened by high inflation 50 years ago,” David Folkerts-Landau, Deutsche Bank chief economist and head of research, wrote in a paper co-written by his colleagues Jim Reid and Peter Hooper. ”The most basic laws of economics, the ones that have stood the test of time over a millennium, have not been suspended. An explosive growth in debt financed largely by central banks is likely to lead to higher inflation.”
“We worry that the painful lessons of an inflationary past are being ignored by central bankers, either because they really believe that this time is different, or they have bought into a new paradigm that low interest rates are here to stay, or they are protecting their institutions by not trying to hold back a political steam roller,” Folkerts-Landau added. “Whatever the reason, we expect inflationary pressures to re-emerge as the Fed continues with its policy of patience and its stated belief that current pressures are largely transitory.”
Don’t worry, it’s temporary: The Consumer Price Index (CPI) for May came out this morning. At 5 percent, it was higher than expected.