Stagflation describes high inflation occurring alongside high unemployment and weak economic growth.
The word combines “stagnation” and “inflation.” Traditional economic thinking often treated inflation and unemployment as moving in opposite directions, especially in interpretations of the Phillips curve. Stagflation challenged that simple relationship by showing that an economy could experience rising prices and deteriorating employment at the same time.
The term became especially prominent during the 1970s. Oil-price shocks, supply disruptions, declining productivity, and difficult macroeconomic policies contributed to severe inflation and weak growth in several advanced economies. The United States experienced high inflation and unemployment during parts of that decade.
Stagflation is different from ordinary inflation, where prices rise without necessarily implying a recession. It is also different from deflation, which means a sustained fall in the general price level. Economists debate the precise causes in each episode, but supply shocks and poorly anchored inflation expectations are common explanations.