Market Review and Trends
Smart Thought Of The Week: Stagflation
By The Smart Investor  •  June 9, 2022
Stagflation is the ugly cousin of inflation. The last time that stagflation made an appearance on the world stage was in the 1970s. But the World Bank is warning countries to brace themselves for the return of stagflation, which is when economies experience a slowdown in growth at the same time as dealing with high inflation. In theory, we shouldn’t have inflation when economic growth is on the back foot. After all, when economic activity is reduced, we would expect prices to fall in response. But the inflation that we are experiencing this time has not been caused by excessive demand. Instead, it is the result of a shocking increase in the cost of oil, supply chains that have been disrupted or broken, and a frightening rise in the cost of food. So, what can central banks do? If they should cut interest rates to boost economic growth, then that could worsen inflation....
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By The Smart Investor
The Smart Investor is co-founded by David Kuo, Joanna Sng, and Chin Hui Leong. The company was formed in late 2019 from the ashes of the Motley Fool Singapore. The Smart Investor believes that everybody can learn how to invest, smartly. We aim to educate people on how to invest smartly by providing investing education, stock commentary and market coverage for Singapore and around the world.

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