stagflation over years? Four reasons that speak for it

Berlin The global economy is being driven from one crisis to the next. After the corona shock, the Russian war of aggression in Ukraine and the rapidly increasing energy prices are burdening the economy. Both slow down economic growth. But one thing is different: While prices fell during the pandemic, inflation is now at its highest level in a long time.

With that, stagflation has returned. It is feared because there is a crucial conflict of objectives for monetary and financial policy: Measures to boost growth increase inflation, while the fight against inflation in turn puts a strain on the economy.

Germany is already in stagflation: In March, economic growth was around zero, and the inflation rate at 7.3 percent was higher than it had been in 40 years. The minutes recently published by the European Central Bank also speak of a “stagflationary shock”.

But this is a snapshot. More important is: will stagflation persist and, if so, for how long?