If prices keep rising, a nightmare scenario for the US economy is a real possibility
CNN
There's no denying it: Inflation is here. Consumer prices surged 7% over the past year. Housing prices have continued to soar, too. But the question on the minds of many economists and Wall Street strategists is whether something even worse could be in the cards: prices rising as the economy slows.
That's the textbook definition of stagflation, and it would be the worst nightmare for consumers, investors and the Federal Reserve. Not to mention President Joe Biden and the rest of the Democratic leadership in Washington. Just ask former president Jimmy Carter, who lost to Ronald Reagan in his 1980 re-election bid as the economy suffered from surging gas prices.
Stagflation is a difficult problem to overcome, especially for central bankers at the Fed and around the rest of the world. There are few tools to combat both inflation and a slowdown at the same time. The strongest fix for an economic slump is to lower interest rates, but those have been at near zero for almost two years.
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