New economic risks have some experts warning about stagflation — a combination of low economic growth and high inflation.
Persistent inflation above the Fed’s target and the job market slowdown had already prompted worries. Then surging oil prices due to the war in Iran have drawn comparisons to the oil supply shocks that led to shortages and long gas lines Americans saw during stagflation in the 1970s.
Yet some economists say full-blown stagflation, sometimes dubbed a worst-case scenario for the U.S. economy, may not manifest as strongly as it did then, if at all.
“If there’s a recession and inflation goes up, then there’s a potential for a short period of stagflation, which means low, below potential growth rate and higher inflation, but not something close to what happened in the 70s and early 80s,” said Eugenio Aleman, chief economist at financial firm Raymond James.
Raymond James’ forecast calls for only a 35% to 40% chance of a U.S. recession, he said.
