Stagflation is an economic condition characterized by the unusual combination of stagnant economic growth, high unemployment, and rising inflation. Typically, inflation occurs in a growing economy, but during stagflation, the economy experiences slow or no growth while prices continue to rise, creating a challenging situation for policymakers. This phenomenon defies traditional economic theories, which suggest that inflation and unemployment usually move in opposite directions. Stagflation makes it difficult for central banks to implement corrective measures, as efforts to control inflation (like raising interest rates) may worsen unemployment, while steps to boost growth (like lowering interest rates) could fuel inflation further. The term gained prominence during the 1970s oil crisis when many economies, including the United States, faced this difficult economic scenario.

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