The worst combination: high inflation and a stagnant economy at the same time.
Normally inflation and a weak economy don't show up together, rising prices usually come with strong demand, and a weak economy usually cools prices down. Stagflation is when both happen at once: growth stalls, unemployment climbs, and prices keep rising anyway. It leaves central banks with an ugly choice, since raising rates to fight inflation risks making the weak growth worse, and cutting rates to help growth risks making inflation worse. The 1970s is the reference point everyone reaches for, and any hint of a repeat gets outsized attention for exactly that reason.
Part of the Open Bell Glossary — plain-English explanations of the terms that come up on the show. Browse every term.