2024 inflation lower but 2026-2028 might be different trend
note: this is just precaution, a risk management, a bad scenario when happen, and know why it could happen
there an article in twitter posted by Kobeissiletter (the source of picture)
it making similar movement like stagflation which potentially could see a higher inflation later
but we are not in stagflation because inflation and unemployment still low
and based on 1970s there is oil shock too
An oil shock refers to a sudden and significant increase in the price of oil, usually due to a disruption in the global oil supply. This can result from geopolitical events, natural disasters, or other factors that impact the production or distribution of oil on a large scale. Oil shocks have historically had profound effects on the global economy, often leading to economic recessions and changes in economic policies.
The 1970s witnessed two major oil shocks:
1973 Oil Crisis:
Trigger: The Organization of Arab Petroleum Exporting Countries (OAPEC), consisting of Arab members of the OPEC, proclaimed an oil embargo in response to the Yom Kippur War between Israel and a coalition of Arab states in October 1973.
Effect: Oil prices quadrupled, leading to a significant increase in production costs for many countries. This contributed to a period of high inflation and economic recession in several oil-importing nations.
1979 Oil Crisis:
Trigger: The Iranian Revolution in 1979 led to a disruption in oil production in Iran. Additionally, the Iran-Iraq War, which began in 1980, further strained oil supplies from the region.
Effect: Oil prices surged again, exacerbating inflationary pressures and contributing to economic challenges in various countries. The second oil shock reinforced the economic difficulties already present from the first oil crisis.
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Stagflation:
Stagflation is an economic phenomenon characterized by a combination of stagnant economic growth, high unemployment, and high inflation. Typically, inflation and unemployment move in opposite directions, but during periods of stagflation, both can be high simultaneously, which poses a challenge for policymakers.
In the early 1970s, inflation started to rise, driven by factors like increased government spending, loose monetary policy, and the cost-push effects of rising oil prices.
The Nixon administration implemented wage and price controls in 1971 in an attempt to combat inflation, but these measures were largely unsuccessful.
In 1973, the first oil shock occurred, leading to a significant spike in oil prices and contributing to inflationary pressures.
In 1974, inflation reached double-digit levels, and the U.S. experienced a recession, marking a period of stagflation.
In the latter part of the 1970s, there were efforts to address inflation through tighter monetary policies, but these measures initially had limited success.
The second oil shock in 1979 further exacerbated inflationary pressures.
It was only in the early 1980s, under the leadership of Federal Reserve Chairman Paul Volcker, that a more aggressive monetary policy was implemented to bring inflation under control. This involved raising interest rates significantly, which eventually led to a decline in inflation, albeit at the cost of a severe recession.
there an article in twitter posted by Kobeissiletter (the source of picture)
it making similar movement like stagflation which potentially could see a higher inflation later
but we are not in stagflation because inflation and unemployment still low
and based on 1970s there is oil shock too
An oil shock refers to a sudden and significant increase in the price of oil, usually due to a disruption in the global oil supply. This can result from geopolitical events, natural disasters, or other factors that impact the production or distribution of oil on a large scale. Oil shocks have historically had profound effects on the global economy, often leading to economic recessions and changes in economic policies.
The 1970s witnessed two major oil shocks:
1973 Oil Crisis:
Trigger: The Organization of Arab Petroleum Exporting Countries (OAPEC), consisting of Arab members of the OPEC, proclaimed an oil embargo in response to the Yom Kippur War between Israel and a coalition of Arab states in October 1973.
Effect: Oil prices quadrupled, leading to a significant increase in production costs for many countries. This contributed to a period of high inflation and economic recession in several oil-importing nations.
1979 Oil Crisis:
Trigger: The Iranian Revolution in 1979 led to a disruption in oil production in Iran. Additionally, the Iran-Iraq War, which began in 1980, further strained oil supplies from the region.
Effect: Oil prices surged again, exacerbating inflationary pressures and contributing to economic challenges in various countries. The second oil shock reinforced the economic difficulties already present from the first oil crisis.
------------------------------------------------------------------------------------------------------------------
Stagflation:
Stagflation is an economic phenomenon characterized by a combination of stagnant economic growth, high unemployment, and high inflation. Typically, inflation and unemployment move in opposite directions, but during periods of stagflation, both can be high simultaneously, which poses a challenge for policymakers.
In the early 1970s, inflation started to rise, driven by factors like increased government spending, loose monetary policy, and the cost-push effects of rising oil prices.
The Nixon administration implemented wage and price controls in 1971 in an attempt to combat inflation, but these measures were largely unsuccessful.
In 1973, the first oil shock occurred, leading to a significant spike in oil prices and contributing to inflationary pressures.
In 1974, inflation reached double-digit levels, and the U.S. experienced a recession, marking a period of stagflation.
In the latter part of the 1970s, there were efforts to address inflation through tighter monetary policies, but these measures initially had limited success.
The second oil shock in 1979 further exacerbated inflationary pressures.
It was only in the early 1980s, under the leadership of Federal Reserve Chairman Paul Volcker, that a more aggressive monetary policy was implemented to bring inflation under control. This involved raising interest rates significantly, which eventually led to a decline in inflation, albeit at the cost of a severe recession.