Moody's Talks - Inside Economics Stagflation(ish)
Jun 13, 2025
Matt Colyar, an inflation expert and Assistant Director at Moody's Analytics, dives into the rising threat of stagflation. He discusses how higher tariffs and geopolitical conflicts are poised to push inflation rates up. Attention is also given to the potential for a recession, examining factors like labor supply and energy prices. Colyar emphasizes the role of consumer behavior in navigating economic fluctuations and the Federal Reserve's challenge in maintaining its inflation mandate amidst these pressures.
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Understanding Stagflation Basics
- Stagflation means stagnant growth, high unemployment, and high inflation occurring together. - It's historically difficult to escape without severe recession, as seen in the 1970s-80s US experience.
Inflation Expectations Matter
- Inflation expectations critically influence stagflation risks. - Rising expectations can reinforce inflation, making it self-perpetuating and harder to control.
Why Tariff Effects Delay Inflation
- Higher tariffs from April haven't yet fully passed through to inflation due to softer demand and inventory pre-purchases. - Businesses are absorbing costs expecting tariffs to be rolled back, delaying price increases for consumers.