Staglfation Risk Grows in U.S.
Inflation has become a major problem in America and for now has shown no signs of going away.
From Fox Business. The U.S. economy is at a mounting risk of spiraling into a 1970s-style stagflation crisis as the Russia-Ukraine war exacerbates already sky-high inflation, according to a new analysis.
The Economist Intelligence Unit, in a Thursday note, predicted that consumer prices will continue to hover near a 40-year-high “at least until the middle of the year,” weighing on consumer spending and real GDP growth. The London-based group already lowered its forecast for U.S. GDP this year from 3.4% to 3%.
Combined with an increasingly aggressive Federal Reserve, which lifted interest rates by a quarter-point in March and signaled at least six more, similarly sized increases this year, and the fallout from the Ukraine invasion, the outlook for the U.S. economy is growing bleaker….
Stagflation is the combination of economic stagnation and high inflation, characterized by soaring consumer prices as well as high unemployment….
A telltale sign, and consequence, of stagflation is rising energy prices, according to many economists, who believe it occurs when a sudden increase in the cost of oil reduces an economy’s productive capacity….
There are other economists who believe the U.S. economy is showcasing signs of stagflation today, as the Russian invasion of Ukraine sent oil prices soaring. Crude prices were steady on Friday and were poised to fall slightly as countries announced plans to release supplies from their stockpiles.
Consumer prices already jumped 7.9% in February, just as the war in Europe began, and are expected to remain elevated in the coming months.
Danielle DiMartino Booth, the CEO and chief strategist of Quill Intelligence and a former adviser to a Dallas Fed president, said stagflation “appears to be an imminent development….”
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(Excerpt from Fox Business. Photo Credit: Andre Taissin on Unsplash)
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