How high should I rate a good student for PhD admission?
The question of gauging inflation in these situations is both serious and important. It affects peoples' lives!

The difficult task of the letter writer is to visualize what other letter-writers will say, their degree of effusiveness. "Being brutally honest" is obviously stupid and naive to the point of destructiveness.

The operational issue is about achieving the desired effect. And, in particular, if your recommendee is fairly exceptional, it would be a grievous error to praise them "modestly". Yes, the problem is to discriminate between "fairly exceptional" and "exceptional" and "truly exceptional". And these are not things that can be rationally discussed about young people by committees...

Thus, consider the noise in the system into which you put your information...