Stagflation
Stagflation is high inflation combined with slow growth and high unemployment. It's hard to fix because raising rates to cut inflation also slows the economy further.
The 1970s oil shocks caused the best-known case, which ended when the Fed under Paul Volcker raised rates to nearly 20%.
Related terms
- Inflation: Inflation is the rate at which prices across the economy rise over time, so each dollar buys less.
- Recession: A recession is a significant, widespread fall in economic activity that lasts more than a few months.
- Monetary policy: Monetary policy is how a central bank manages interest rates and the money supply to keep inflation low and employment high.
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