$BTC The atmosphere on Wall Street and among those shaping U.S. economic policy is tenser than ever. It seems that the obsessive phenomenon known as 'stagflation' — a combination of economic stagnation, sluggish growth, and hyperinflation that shook the global economy in the 1970s — risks making a comeback. The U.S. Federal Reserve (Fed) cannot ignore this.

Although Fed Chairman Jerome Powell at his last press conference on May 7 (U.S. time) still tried to reassure the market by stating that the U.S. economy 'remains stable,' and the Fed 'has all the tools to see what happens next,' minor changes in the policy statement revealed growing concerns about the actual trajectory of the economy.

In particular, the Fed decided to keep the baseline interest rate unchanged, for the first time acknowledging the risk that inflation could be more persistent than expected, and that the unemployment rate is likely to rise as well — two perfect elements of the stagflation picture.