Russia’s invasion of Ukraine added to fears that began brewing in 2021 that the world may be revisited by something not seen much in decades: stagflation. Recent steps by the US Federal Reserve and other central banks to fight the highest inflation rates of the century have only added to stagflation worries.
A combination of the words “stagnation” and “inflation,” it describes an economy with high unemployment and little to no growth even as prices are rising faster than normal. Iain Macleod, a British politician, coined the term in 1965. Plenty of economists once doubted stagflation was possible. That’s because unemployment and inflation typically move in opposite directions, since price levels are usually driven by an economy’s level of demand, and unemployment generally falls when demand booms.