Most people know about inflation. Most people know about recessions. What most people don't know is that you can get both at the same time — and that when you do, the normal tools for fixing one make the other worse.

That's stagflation.

The word gets thrown around in financial headlines, but rarely explained. It's a combination of "stagnation" (slow or no economic growth) and "inflation" (rising prices). Normally these two don't coexist. A hot economy tends to push prices up. A cold economy tends to bring prices down. Central banks manage this seesaw with interest rates — raise them to cool inflation, cut them to spark growth.

Stagflation snaps the seesaw in half.

When prices are rising and the economy is slowing simultaneously, the Fed faces an impossible choice. Raise rates to fight inflation, and you choke off what little growth remains. Cut rates to support the economy, and inflation runs hotter. Neither option is clean. That's exactly why stagflation is the scenario policymakers dread most.

The US experienced it firsthand in the 1970s. An OPEC oil embargo triggered a supply shock — energy costs exploded, but the economy didn't grow to absorb them. Inflation hit 14%. Unemployment climbed above 9%. It took a decade of painful policy, culminating in Federal Reserve Chair Paul Volcker deliberately engineering a recession in 1981, to finally break it.

Here's why it matters right now: tariffs are a supply shock. They raise the cost of imported goods — which feeds into inflation — while simultaneously slowing trade and investment. That's a remarkably similar setup to an oil embargo: costs go up, but the economic activity that would normally absorb those costs doesn't materialize. If tariffs persist and broaden, the stagflation risk is real.

It's not inevitable. Economies are resilient, and policymakers have more tools today than in the 1970s. But when you see headlines saying "inflation remains sticky" alongside "growth is slowing," you're watching the two ingredients combine in real time.

Now you know what to call it.

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