Economy · Core
Stagflation
Stagflation is high inflation with stagnant growth and a soft labor market — the 1970s regime that breaks the simple Phillips cartoon.
Definition
Inflation stays high while output is weak (or unemployment high). Supply shocks plus unanchored expectations are the usual story. Policy cannot ease for growth without feeding prices, or tighten for prices without killing growth.
Why it matters
It is the nightmare mix for 60/40: bonds fail as inflation insurance and equities fail as growth assets.
Case
1973–74 oil shock: inflation up, output down. Real rates had to go high to re-anchor. The landing was not soft.
How to read it
Supply vs demand, expectations, and whether labor is actually stagnating. A quarter of weak growth plus sticky CPI is not automatically 1974.
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