You don't hear much about economic downturns or inflation from the government and indeed not even much from the media. But The Austrailian doesn't shy from an assessment that the United States could be facing stagflation - a combination of a slowing economy and rising inflation that eats away the standard of living.
The Economist opined last year that while the United States was not facing the same dual punch as it did in the 1970s (with inflation above 7% and GDP growth hovering at 1%), the Federal Reserve was running too loose of a monetary policy to effectively contain inflation. This means that interest rates are still too low to act as a curb on borrowing and spending (which leads to inflation).
However, the data show that we aren't really in trouble yet. Pulling some data from the BLS, we see that US inflation (as measured by the Consumer Price Index) was up 3.3% last year and is up at a similar annual rate this year. And GDP growth was 3.5% in 2005 and 5.6% (annualized) in the first quarter of 2006. So despite a growing number of news stories about it, do we really need to worry about stagflation yet?
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