Stagflation was an economic scourge of the 1970s that combined anemic economic growth, high inflation, and high unemployment. And once again there are warnings of a return, this time in a bond market worried about tariffs.
This peculiar set of circumstances has been an on-and-off concern for a few years. In May 2022, when the Federal Reserve’s actions to slow inflation were still unknown, experts anticipated the central bank to peak raising the federal funds rate at 2.5% in 2023 with growth slowing to 2% then. Stagflation would likely happen but last only a short time.
Time would show the benchmark interest rate to more than double the prediction, with unemployment remaining low and growth continuing. No stagflation.
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