A new economic term has entered the social media stage. “Stagflation” is a term coined by the combination of stagnation and inflation, a duo of economic forces coming to a head.
According to Alan Jin, an Economics professor at the University of San Diego, the forces of increased inflation and market stagnation are co-existing in a rare economic event, meaning prices are rising, while the GDP continues to stay relatively immobile, compared to years prior.
In addition, job reports have remained less hopeful than in the past, according to Jin, creating a perfect storm.
“If inflation is high, at least you get low unemployment; if unemployment is high, usually you get low inflation,” Jin said. “This time you got both problems. I think the main cause of that is the Tariffs.”
Jin explained that the cost of Tariffs is typically passed on to consumers, meaning imported goods cost more.
The Federal Reserve Cutting rates and signaling more cuts to come does help consumers seeking to buy a home and people holding credit card debt, though the slight rate cuts are a symbol of economists working to thread a very tiny needle.
“If [they] cut interest rates a lot, to boost the economy, to get employment going again … you also risk stimulating inflation, causing inflation to go even higher, so the Fed is just in a tough spot right now.”