What is estimate inflation?

Estimate inflation is the term used when team estimates start growing over time. If a product backlog item was earlier estimated as 3 story points and a similar item is now estimated as 5 story points, this is referred to as Estimate Inflation.

What causes estimate inflation?

Higher management, often, mistakes high velocity as high productivity and put a tremendous pressure on the scrum teams to increase their velocity. In order to achieve a target velocity, team then starts inflating their story point estimates. This inflation has a ripple effect on other product backlog items that have not yet been estimated. During planning poker, when team estimates a product backlog item, they compare their story to an already inflated story and provide another inflated estimate. 

How to limit estimate inflation?

Mike Cohn recommends to compare the product backlog item being estimated to two or more other items to ensure consistency among estimates. When you compare the item with two or more backlog items during planning poker, the probability to compare against inflated estimates is reduced. 

What are the challenges to this approach? 

Time is the biggest challenge. Development team do not like to spend additional time during planning poker to compare the item against multiple backlog items.