$BTC The atmosphere on Wall Street and among those shaping U.S. economic policy is more tense 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 — is at risk of making a comeback. The U.S. Federal Reserve (Fed) cannot ignore this.

Although Fed Chairman Jerome Powell, in his latest press conference on May 7 (U.S. time), still tried to reassure the market by stating that the U.S. economy 'remains stable,' and that 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 benchmark interest rate unchanged, acknowledging for the first time the risk that inflation may be more persistent than expected, and that the unemployment rate is also likely to rise — two perfect elements of the stagflation picture.