Stagflation

High inflation and weak growth or rising unemployment at the same time. It is hard to treat, because raising rates to fight inflation also weakens the economy further.

Example

In the US, inflation reached 12.2% in November 1974 and unemployment 9.0% in May 1975, after the first oil shock.

Explained in

Mechanic 03How an oil shock travels through the economy Mechanic 01How inflation, interest rates and bond yields fit together

Related concepts

Inflation Core inflation Inflation target Central bank Policy rate Government bond Bond yield Real interest rate

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