So, what is stagflation, anyway, and why is it so scary?

There’s no cocktail a central banker hates more than high unemployment mixed with high inflation. That cocktail, also known as stagflation, was in the limelight after the Federal Reserve’s March meeting.

The Federal Reserve on Wednesday painted a picture of an economy reshaped dramatically by Donald Trump and his economic policy. It warned tariffs would slow the economy and raise inflation, increasing the risk of dreaded “stagflation,” an economic curse that is hard to escape. Eager to soothe worried investors, businesses and consumers, the Fed urged caution about getting too worked up about its forecast, noting that inflation caused by tariffs may not be long lasting. Nevertheless, there’s no cocktail a central banker hates more than high unemployment mixed with high inflation. That cocktail – stagflation – was in the limelight after the Fed’s March meeting. While Wall Street was already starting to sound the alarm about stagflation, Fed Chair Jerome Powell has remained relatively sanguine. That held true at Wednesday’s post-meeting press conference. But many market observers felt Fed officials’ new economic forecasts nevertheless gave off whiffs of stagflation. According to officials’ latest median estimates, the US unemployment rate may hit 4.4% by year’s end and inflation, as measured by the Personal Consumption Expenditures price index, could rise to 2.7%.