Catalyst Funds CIO David Miller in U.S. News and World Report

What Is Stagflation?

The economy has been resilient amid inflation and high interest rates. Still, investors should be aware of stagflation’s red flags.

Key Takeaways

  • Stagflation is a mashup of inflation, slow economic growth and a high unemployment rate.
  • Stagflation is tied to low productivity as companies make cuts and people slow their spending.
  • Policymakers often face a choice between rampant inflation and higher unemployment.
  • Rising interest rates can slow inflation, but inflation can reaccelerate if rates come down too soon.

Stagflation is an economic perfect storm that combines inflation, supply shortages and slower growth, along with a high unemployment rate. The 1970s is often referenced as a period of severe stagflation that brought higher jobless rates, soaring inflation and two economic recessions.

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