Stagflation on the radar for US economy, but no repeat of '70s

Recent economic projections from Federal Reserve officials had shades of "Stagflation-lite," in the words of one economist, a sentiment increasingly echoed among other observers of the US economy and central bank wondering if the country's outperformance during the pandemic is about to slide.

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So what is stagflation and why is it suddenly on everyone’s mind?

THAT (BAD) '70s SHOW

Stagflation, or a period of both high inflation and high joblessness, hit the US notably in the 1970s, which may have featured the worst US economic leadership since the Great Depression, as officials had their data and their framework wrong and elected officials flailed against inflation with price controls and what now seem quaint public relations efforts, most notoriously the Ford administration’s “Whip Inflation Now (WIN)” button campaign.

As economists in recent weeks have begun marking down their estimates of economic growth and marking up estimates of inflation in the face of dramatic economic policy shifts under President Donald Trump, it has sparked debate about whether that could be unfolding again now.

In theory, a weaker economy with rising unemployment undercuts inflation, so the two should not coexist. But as with oil price shocks in the 1970s that drove prices higher, the tariffshock anticipated from Mr. Trump’s trade policies now has the world guessing.

The Trump administration says the tariffs are part of what they bill as a transition for the economy that, coupled with other efforts to deregulate industry and cut taxes, will produce both plentiful jobs and lower inflation.

The hints of stagflation in current forecasts aren’t near as bad as