The Return Of Inflation And Recession Fears

Have you heard the word stagflation? It's more associated in recent times to U.S. economy. If you guessed that stagflation means a combination of stagnation and inflation that's close. The long story short, the fears of both, in relation to U.S. economy are are coming back.

The Wall Street Journal writes "The U.S. faces the specter of stagflation, a combination of inflation and recession, for the first time since the 1970s. Fed policy makers were still concerned about downside risks to growth following their latest meeting to cut rates, minutes showed."

However, U.S. financial and equity markets ignore inflation warnings as The Dow Jones industrials rose 90.04 points to 12427.26, recovering from a loss of more than 100 points amid expectations of further rate cuts.

But inflation is rising. Tuesday, on February the 19th the Labor Department of United States said consumer prices in the U.S. jumped 0.4% in January and are up 4.3% over the past 12 months, near a 16-year high. Even stripping out sharply rising food and energy costs, prices rose 0.3% in January, driven by education, medical care, clothing and hotels. They are up by 2.5% from the previous year, a 10-month high.

Interestingly despite the majority of Americans expecting economic recession Xinhua reports that Europeans thing there is no need to feel the same way about the EU economy.

There is no need to fear economic recession in Europe despite increasing downside risks, the European Commission president Jose Manuel Barroso said on Monday.

"We have no rational reason to fear recession," Barroso said ina statement ahead of his unusual attendance at a regular meeting of eurozone finance ministers, which kicked off later today.

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