Tracking the Two-Headed Monster

Usually, when the economy slows down, prices drop. But right now, we are tracking a rare anomaly: Stagnation + Inflation = Stagflation.

The Trigger Point A distant conflict has disrupted the Strait of Hormuz, slashing critical shipping routes for oil, LNG, and even fertilizer. This has caused global oil prices to spike by over 60%. Because everything transported by ship or made with oil becomes instantly more expensive, we are facing a cost-push price hike.

The Policy Trap Our usual economic weapons don’t work here. If the Federal Reserve raises interest rates to fight inflation, they risk crushing businesses already struggling with slow growth. If they cut rates to save jobs, they pour “gasoline on the inflation fire”.