Fears about stagflation are mounting in the US. It's every central banker's worst nightmare
For the past few years, the US economy has been growing at a pace that seemed too good to be true. Thursday’s gross domestic product report showed the US economy grew at an annualized rate of 1.6% in the first quarter of this year compared to the 3.4% rate in the previous quarter. However, there is concern about rising inflation as the latest data shows prices ticking up to a 3.4% annualized rate in the first quarter. This combination of slowing economic growth and rising inflation is known as stagflation, which is worrying for central bankers and investors. Low rates of unemployment can help to mitigate some of the effects of high inflation. Some economists draw parallels to the stagflation of the 1970s but believe the current situation is not as severe. The consensus among economists and investment strategists is that the days of the Goldilocks economy, with decreasing inflation and strong GDP, may be coming to an end.