Quick Take
Due to the economy being built on credit, both growth, and expansion are necessities. As such, central banks’ biggest fear is deflation and stagflation. Take the U.K. as an example — though this can be attributed to many Western countries.
Three metrics that contribute to stagflation;
Persistent high inflation: Inflation has been higher than the CPI goal of 2% for over a year now, and the biggest worry for central banks is entrenched inflation. For example, in the U.K., CPI Inflation has been double digits for almost a year — while core inflation has been as high as 6% for over a year.
Stagnant demand in a country’s economy: U.K. real GDP is still below Q4 2019.
High unemployment: We aren’t here yet, but the U.K. unemployment rate did spike from 3.7% to 3.8%. As interest rates continue to rise and stay elevated, this will further pressure the labor market.
Stagflation was last seen in the 1970s, and consumer good prices tend to rise — while asset prices tend to d
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