A period of high inflation combined with high unemployment, weak growth, and stagnant demand is called stagflation.
The word blends “stagnation” and “inflation.” It describes a difficult combination because prices rise even while the economy struggles to expand and jobs are scarce. Policymakers face a dilemma: raising interest rates may reduce inflation but further weaken output and employment, while stimulus may support jobs yet intensify price pressures.
British politician Iain Macleod is generally credited with popularizing the term in a 1965 speech about the United Kingdom. It became widely known during the 1970s, when oil-price shocks, supply disruptions, and policy mistakes produced simultaneous inflation and economic weakness across several major economies.
Stagflation challenged the simple interpretation of the Phillips curve, which suggested that inflation and unemployment tended to move in opposite directions. Recession means declining economic activity, but does not necessarily include high inflation; deflation means falling prices; and hyperinflation means extraordinarily rapid inflation.