Stagflation: What It Is and Why Markets Are Paying Attention Right Now
The last few weeks, I’ve been seeing the term “stagflation” pop up more and more to describe the situation Canada – and to a lesser extent the US – may find themselves in over the coming months. At a basic level, inflation is when the overall cost of living rises over time, meaning your money doesn’t go as far as it used to. Most central banks, including the Bank of Canada (BoC) and the Federal Reserve (Fed), aim for around 2% inflation per year, which is considered healthy for a growing economy. A recession, on the other hand, is when economic activity slows down – businesses earn less, hiring weakens, and unemployment begins to rise. But what exactly is stagflation? This week, I thought I’d take a closer look.