Here's how one expert says the Fed's emergency rate cut could create a toxic situation where higher prices conflict with coronavirus-stricken growth
Bracing for stagflation
There have been some signs of this kind of economic environment in China, where the virus originated. Prices have skyrocketed amid government shutdowns, according to Zhiwei Ren, managing director of Penn Mutual Asset Management. But, Ren thinks that the situation is likely to correct itself when the spread of the virus slows and production returns to normal.
"We talk about the fact that there's no inflation in the economy, but if you look at the inflation in financial assets, it's been profound," she said. Inflation in prices in the US has been low over the last decade, while the stock market has enjoyed a compound annual growth rate over 14% in the same time period.
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