It’s an economic scenario that hobbled the US economy in the 1970s, and it entails a slowdown in economic growth while inflation remains stubbornly high. <\/p>\n
It’s widely considered to be even harder for monetary policymakers to tackle than a typical recession, as central bank officials can’t lower interest rates to boost growth out of fear of stoking more inflation. <\/p>\n
“This is essentially stagflation<\/a>,” Sl\u00f8k said about what yields are implying about the US economic outlook “By definition, tariffs mean higher inflation, and it means lower growth,” he told CNBC on Friday. <\/p>\n Bond yields have been rising this year, but the move higher has accelerated in recent weeks. It has been driven partly by concerns about the US budget deficit<\/a>, and partly by fears that President Donald Trump’s tariffs will raise prices, leading to higher interest rates<\/a> in the economy.<\/p>\n The yield on the 10-year US Treasury <\/a>spiked as high as 4.61% this week, up 63 basis points from lows in early April. <\/p>\n<\/p>\n The 10-year yield is trading within the range that implies some market participants are pricing in a recession with a stagflation scenario, Naomi Fink, chief global strategist at Nikko Asset Management, wrote in a note this week.<\/p>\n The 10-year yield trading around 4.5% is a sign that some market participants are pricing in a US recession with stagflation, according to Nikko Asset Management<\/p>\n Nikko Asset Management<\/p>\n The yield on the 2-year US Treasury<\/a> was about 3.96% on Friday, down 28 basis points from the start of the year. That can be a sign that investors expect the economy to weaken over the near term, which would prompt lower interest rates.<\/p>\n Consensus expectations for US economic growth<\/a> have already started to trend downward, while inflation expectations have climbed, Sl\u00f8k said in a note to clients this month.<\/p>\n Consensus expectations for US GDP growth have dropped this year. Meanwhile, expectations for core PCE, a core measure of the Fed’s preferred inflation gauge, have climbed.<\/p>\n Apollo Global Management<\/p>\n Stagflation concerns<\/a> have been creeping back into the mix of Wall Street commentary as traders turn their attention away from trade deals and eye the longer-run impact of tariffs.<\/p>\n JPMorgan boss Jamie Dimon<\/a> said he believed the economy was still at risk of stagflation this week, though he wasn’t necessarily forecasting the scenario.<\/p>\n “I think global fiscal deficits are inflationary. I think the remilitarization of the world is inflationary. The restructuring of trade is inflationary,” he said, speaking to Bloomberg on Thursday.<\/p>\n<\/p>\n
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