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February 01, 2008

‘Stagflation-lite,’ if not the full deal?

That’s what Chris Farell says over at Business Week:
The risk for business, consumers, and investors is the emergence of a different kind of stagflation—call it “stagflation-lite.” It would be defined by higher-than-expected inflation rates (say, a 5.6% increase in the CPI) and lower-than-expected growth rates (like a 0.6% economic expansion).

Whether we’re in an actual recession now or not, and if so, how long and how deep it will be are still up in the area.

But, given that adjustable-rate mortgages will have a second reset peak in 2010, I think Farrell’s “stagflation-light” could be around for a few years.

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