Deutsche Bank Report: The global economy is undergoing a paradigm shift, with supply constraints driving inflation and traditional policy tools losing effectiveness.
In its latest report published on September 14, Deutsche Bank stated that the global economy has shifted from a demand-deficient model that dominated the past decade to a new era driven by supply constraints. Citing a hypothetical Strait of Hormuz blockade in 2026 as an example, the report noted that it would lead to Brent crude oil prices returning above $100 per barrel and European natural gas futures prices rising to their highest levels since late 2022, indicating that the biggest shocks year-to-date have originated from the supply side. Deutsche Bank warned that in a supply-constrained world, inflation will experience more frequent pulsatile increases, monetary easing will become progressively less effective, fiscal stimulus will be more prone to exacerbating overheating, and the old policy playbook is failing. Expanding the economy's supply frontier will become the central proposition for future policymaking.
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