When inflation hits 8% throughout history, what happens next? Economists at Deutsche Bank take a dispassionate look at how inflation has evolved following previous spikes.

Should we have been so surprised by the stickiness of inflation?

“The evidence shows that once inflation spikes above 8%, median inflation takes around 2 years to even fall beneath 6%, before settling around that level out to 5 years after the initial 8% shock. This is around 2pp above the pre-shock median of c. 4%.”

“The current consensus expects us to be back at or even below 3% just two years after we initially moved above 8%. This is far from impossible, but it would be around the 25th percentile of observations through history, and around 4pp beneath the median outcome.”