Stagflation

An economic condition where prices rise significantly during a period of slow economic growth and high unemployment. This creates a quandary for economic policymakers. If they try to increase liquidity and cut interest rates they can further fuel inflation. However, if they try to lower inflation, they run the risk of sending the economy into a prolonged recession. Many countries were hit by stagflation in the 1970s when oil prices rose sharply.

This definition is for general information purposes only