Global Economy in Danger to Enter Stagflation

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Global Economy in Danger to Enter Stagflation
19 May 2022
4 min read

News Synopsis

Policymakers and business leaders say the global economy risks entering a period known as stagflation, or high inflation and weak growth, that could erode living standards around the world.

Treasury Secretary Janet Yellen said in Bonn, Germany, “Certainly the economic outlook globally is challenging and uncertain. Higher food and energy prices are having stagflationary effects, namely depressing output, and spending and raising inflation all around the world.”

Concerns about high inflation grew in financial markets on Wednesday after major retailers reported disappointing profits in part due to their higher costs. The Dow Jones Industrial Average was down more than 1,164 points, or 3.6%, as of 4 p.m. reporting its worst day since 2020.

Earlier this week, Ben Bernanke, also a former Fed chief, raised the possibility of stagnant inflation in an interview published in the New York Times. “Even in the benign scenario, we should have a slowing economy,” he said. “And inflation is still too high but falling.

Inflation fears have grown in recent days as new pressures could push oil and food prices up from already high levels. The European Union this week launched a plan to end its dependence on Russian energy within five years.

TWN In-Focus