According to a Washington Post Poll surveying a random national sample of 1,055 adults, most Americans expect inflation to get worse in the next year.
The survey results come just as the World Bank predicts a significant slowdown in global growth. 5.7% percent global growth was seen in 2021, but that number is expected to fall to 2.9% this year and remain there through 2024.
“The war in Ukraine, lockdowns in China, supply-chain disruptions and the risk of stagflation are hammering growth. For many countries, the recession will be hard to avoid,” said World Bank President David Malpass in the June 7 press release.
The report warns of ‘stagflation’, a dangerous economic condition that was seen in the U.S. in the 1970s. Historically, stagflation “required steep increases in interest rates in major advanced economies,” which contributed to serious financial crises.
What is stagflation?
The Associated Press describes stagflation as a situation where “high inflation mixes with a weak job market.” While inflation and unemployment rates typically move in opposite directions, shocks to the market may cause this rare condition where inflation is present and consumers have less money to spend.
In the late ’70s and early ’80s, Federal Reserve Chairman Paul Volker managed to fight inflation by drastically increasing interest rates and “driving the economy into a deep recession” per The New York Times.
Current events and future predictions
The Russian invasion of Ukraine has significantly impacted the global economy, and Europe is struggling to cut down on Russian energy reliance, per Forbes. As impacted countries look for alternative supplies of fossil and alternative fuels, they are predicted to face higher energy prices.
According to the Federal Reserve, the Ukraine war will “reduce GDP and boost inflation significantly, exacerbating the policy trade-offs facing central banks around the world.” As the future remains uncertain, unforeseen developments in the war can quickly change the global economic landscape.
The New York Times reports Eurozone inflation has hit its highest since 1999 when the Euro was established. At 8.1%, it’s double the last peak in 2008 when inflation topped out at 4%.
The Federal Open Market Committee sets interest rates for the U.S. It is predicting a half-point raise (+ 0.005%), though it will holding meetings in June and July to make those decisions, per CNBC.
NPR reports that increased housing prices are preventing many from getting mortgages. Kenny Parcel, a Utah realtor in Spanish Fork, says young people’s dream of home ownership is becoming even more far-fetched in the future.