Definition
Stagflation is the combination of slow economic growth (stagnation), high unemployment and high inflation. It is often thought of as “the worst of both worlds” because it breaks the generally accepted norm that unemployment and inflation go in opposite directions. In blunt terms, if loads of people are unemployed, they can’t buy much because the don’t earn much/any money. This means that inflation stays low. However, when stagflation occurs, unemployment is high and inflation is high – making it way harder for everyone to get out of their rut because they don’t get the “breather” that low inflation would give them.
Last reviewed/edited
16th March 2026, PW