Stagflation may hit economy in 2026
Economist Komal Sri-Kumar expects stagflation in 2026 due to war-related disruptions and constrained government stimulus options, unlike previous wartime economies.
Sri-Kumar suggests that the usual fiscal and monetary policies might not be effective this time. He points out that governments are already heavily indebted, limiting their ability to implement large stimulus packages. The war's impact on supply chains is a key factor, potentially leading to sustained higher prices. This differs from past wartime scenarios where production capacity could be more easily ramped up. Stagflation could pose challenges for investors, requiring a shift in strategy. Traditional safe havens may not perform as expected in an environment of both rising inflation and economic stagnation.
