If prices keep rising, a nightmare scenario for the US economy is a real possibility

That’s the textbook definition of The good news is that “You always want to be vigilant about something like stagflation, but we don’t have high unemployment right now and economic growth is above trend,” she added. “Do we run the risk of stagflation in a rising rate environment? Yes, but it’s unlikely.”The Fed is in uncharted territory. Central bankers have had to deal with many crises in recent decades, but there is no modern playbook for how to handle the threat of runaway inflation following a global pandemic. “The Fed’s monetary policy framework is essentially being tested in real time,” said John Leer, chief economist with Morning Consult, a data intelligence firm. “There is not a lot of guidance.” Spending still strong despite inflation At this point, it appears that rising prices are more a source of consumer complaints and alarmist headlines and not — as yet — a serious economic concern. That’s why experts say investors need to watch and see if consumers actually slow their spending because of inflation. That’s when it would be the time to worry about stagflation. “Consumers may get to a point where they’re not going to pay higher prices and that causes demand destruction. We’re not there yet,” said Mike Skordeles, US macro strategist with Truist Financial. “Stagflation could be a concern if higher prices persist for an extended period of time.”Skordeles also thinks the stagflation worries are “misplaced” right now because growth is still relatively strong and the market has confidence in the Fed.So as long as retail sales remain robust, the case can be made that although shoppers may not be grinning about inflation, they are bearing it for now.