Iran war revives the risk of stagflation 50 years after the last major crisis
The conflict in Iran has raised concerns about the risk of stagflation, a combination of low growth and high inflation, in Europe. European authorities warn that if the conflict becomes entrenched, inflation could reach up to 6% and economic growth could slow down.
European authorities warn about the danger of stagflation due to the conflict in Iran. The combination of high inflation and low growth could be triggered by a significant external shock like a war. The European Union's Economy Commissioner and the Croatian Governor of the European Central Bank have expressed concerns about the risk of stagflation. The ECB projects inflation to reach 2.6% this year, but in a severe scenario, it could exceed 6% by 2027. The duration of the conflict will determine the outcome. The central bank is ready to raise interest rates to curb inflation if necessary.
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