Deutsche Bank predicts a deep recession.

The problem, according to the bank, is that while inflation may peak, it will be a long time before it returns to the Fed's 2% target. This suggests that the central bank will raise interest rates so aggressively that it will hurt the economy.

Consumer prices rose 8.5% in March, the fastest pace in 40 years. Moody's Analytics predicts that the unemployment rate will soon reach its lowest level since the early 1950s.

To prove this, Deutsche Bank created an index that tracks the difference between inflation and unemployment over the past 60 years and the Fed's stated targets for those measures. The study, according to the bank, shows the Fed is "much further off the curve" today than it has been since the early 1980s, when extremely high inflation forced the central bank to raise interest rates to record highs, crushing the economy.

History shows that the Fed has "never been able to correct" even small spikes in inflation and employment "without pushing the economy into a severe recession," Deutsche Bank said."

The good news is that Deutsche Bank is projecting an economic recovery by mid-2024 as the Fed reverses course in its fight against inflation.