‘Stagflation’ fears haunt markets despite Trump’s growth plan
(Source – The Hindu, International Edition – Page No. – 13)
| Topic: GS3 – Economy |
| Context |
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Concerns Over Stagflation in the U.S.:
Rising Inflation and Trade Policies
- Stubborn inflation and Donald Trump’s strict trade policies have raised fears of stagflation, a mix of slow economic growth and high inflation.
- This was a major issue in the 1970s but has not yet become a real threat in recent years.
Investor and Economist Concerns
- Trade wars and tariffs could slow S. economic growth while inflation remains high.
- Jack McIntyre, a portfolio manager, stated that stagflation is now a real possibility due to these policies.
- Inflation rose in January at the fastest pace since August 2023, making the situation more concerning.
Tariffs and Economic Growth
- Trump’s tariffs could act as a tax on consumers, increasing prices and reducing profits and growth.
- A Bank of America survey found that more investors are expecting stagflation in the next year.
- Some experts believe that tariffs could support growth by reducing global competition, but they could also increase price pressures initially.
| What is stagflation? |
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| Practice Question: Discuss the phenomenon of stagflation, its causes, and its impact on economic growth and policy-making. How can governments tackle stagflation effectively? (150 Words /10 marks) |
