The economy
Stagflation
High inflation combined with weak growth and rising unemployment.
How it works
It is the difficult combination because the usual remedies conflict: raising rates to fight inflation worsens the weakness, and supporting growth worsens the inflation.
It is historically the worst environment for a conventional stock and bond portfolio, since both fall together.
Related terms
- InflationThe rate at which prices rise, which means the rate at which each pound or dollar buys less.
- RecessionA significant, broad-based decline in economic activity lasting more than a few months.
- Central bankThe institution that sets a country’s benchmark interest rate and manages its money supply.
- DiversificationSpreading money across things that do not move together, so no single failure can decide your outcome.
More in The economy
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.