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What is stagflation? What you need to know about the dire combination
Think things can’t get worse? Now the World Bank has downgraded its forecast for the global economy, citing factors including stagflation, which happens when economic growth is sluggish while inflation is high.
The term lacks a formal definition or specific threshold, but elements include high unemployment and a weakened economy as prices climb. One factor that can help cause stagflation is a spike in the cost of raw materials, causing inflation and leaving people with less money to spend.
To understand stagflation, you have to understand inflation. Inflation is the rate of price increases for goods and services. It can happen for a number of reasons, from product and labor shortages to higher demand. It can also be spurred by policy decisions on factors such as tariffs, government spending and interest rates.
Stagflation offers a worst-of-all-possible worlds scenario of weak growth and sharply rising prices. That poses a dilemma for the Federal Reserve: It can raise interest rates to fight inflation, but that will further hobble a feeble economy.
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Housing market is driving buyers to tears
A study by real estate website Zillow found that half of U.S. homebuyers cry at least once during the exhaustive process. Additionally, almost 90% of recent buyers surveyed said at least one aspect of the home-buying process proved stressful.
What replaced the tears of joy that can occur when purchasing a house? Zillow found that about 62% of potential homebuyers were stressed about being able to find a home within their budget; about 61% were stressed about not having enough houses to choose from, and around 58% were stressed about finding a home in their desired neighborhood.
“I think we were surprised by the share of recent buyers who said they cried at least once, as there were some who cried at least five times while looking for a home,” Zillow home trends expert Amanda Pendleton told USA TODAY.
Here’s some good news, though: Fannie Mae and Freddie Mac are implementing big reforms aimed at helping people in disadvantaged communities become homeowners and making sure homebuyers of color remain owners. Some of the big-ticket items exclusively reviewed by USA TODAY include assistance with down payments, reserve funding for homeowners’ emergencies and lower mortgage insurance premiums. Freddie and Fannie also are rolling out a new credit reporting system that factors rent payments into creditworthiness scores.
🎧 Mood music 🎧
“I’d like to teach the world to sing in perfect harmony. I’d like to buy the world a Coke. And keep it company.”
LISTEN WHILE YOU WORK: You can hear just about every song quoted in the newsletter on the Daily Money Mood Music playlist on Spotify.