Stagflation

Big rate hikes by the Federal Reserve and the Bank of Canada have yet to quell inflationary expectations, and warnings grow that the weird combination of ...

"The resulting situation is not unlike the stagflation that occurred in the 1970s, when higher consumer prices fed into wages as workers demanded higher wages to match price increases." As with many ideas in economics, there is a lot of argument over the whys and wherefores. Perhaps that's why many economists don't seem to be taking the threat seriously. The report warns that as well as stimulative interest rates and high government spending, another similarity to the 1970s is the impact of imported inflation. The Conference Board report draws parallels with the 1970s, and while it says there are differences, "there are similarities between the two eras, which implies that stagflation remains a risk to the outlook that can't be dismissed out of hand." Similar to the response after warnings of inflation in 2020, most financial commentators have been saying that the threat of stagflation — an unusual combination of a stagnant economy and steady inflation — is small.