Is Stagflation Coming?
Add a Pinch of Tariffs and a Dash of Rate Cuts
What is stagflation?
A country is said to be experiencing stagflation when it is experiencing low levels of economic growth, high levels of unemployment and high levels of inflation. This is where the term “stagflation” comes from, it refers to a situation of a stagnant economy and high inflation.
What is stagflation so bad?
Stagflation brings serious economic pain.
Think of what your life would be like if you lost your job today, knowing you are facing a very weak labor market while at the same time the prices of food, energy and other essential goods begin to increase.
Odds are you would not be very happy. Nobody is happy during times of stagflation which is what led to the creation of the “Misery Index” which is equal to the inflation rate + the unemployment rate.
Could we be heading for a period of stagflation?
For stagflation to occur, two things need to happen at the same time.
- Inflation needs to increase
- Unemployment needs to increase
