Stagflation

When the level of prices in an economy is rising – measured by an index such as the retail or consumer price index – you have inflation. Usually this is associated with growth as firms become more confident about the price they can charge for goods and services and consumers get wealthier on the back of rising wages.

Equally, when prices are falling, you get deflation. This is often associated with a struggling economy, such as Japan’s for much of the last two decades.

Stagflation, on the other hand, is a nasty mix of rising prices (based on high demand, production capacity constraints, or both) and falling growth. It presents a difficult challenge for central banks. Do they raise interest rates to combat inflation, or leave them artificially low to try and encourage growth?

MoneyWeek magazine

Latest issue:

Magazine cover
China's cash problem

How to profit from it

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Bill Bonner: hold on to your cash, the real financial crisis is yet to come

Merryn Somerset Webb talks to Bill Bonner about economic cycles, and the 'catastrophic credit crisis' that will make 2008 look like a picnic.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


6 March 1899: Bayer trademarks Aspirin

Chemical company Bayer was awarded a patent for its pain-relieving acetylsalicylic acid powder, or 'Aspirin', on this day in 1899. It would soon be released in tablet form.