November 29, 2021 — Are the US and other advanced countries experiencing stagflation? Stagflation is the unfortunate combination of high inflation with low growth in output and employment that characterized the mid-1970s. Are we back in that decade?
No. At least not the US. What it is experiencing now is simply (moderate) inflation, without the stagnation part. More like the 1960s than the 1970s.
It is true that the US headline CPI inflation rate reached 6.2 % over the 12 months to October, the highest since 1991. Few are still forecasting an early return to 2 % , the Fed’s long-run target. Inflation is also the highest in 10 years in the UK (4.2 %) and the EU (4.4 %), though it remains low in Japan. 12-month inflation is 4.1 % in the eurozone, the highest since a peak in July 2008. (All these regions have lower – but still elevated — inflation rates if one uses the core measure, which takes out fast-rising food and energy prices. US core inflation is 4.6%.)