Gas prices in Arlington, Virginia in early April sat above $4.00 a gallon.Celal Gunes/Anadolu via Getty Images
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Stagflation and labor-market risks are growing as the Iran war continues.
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KPMG chief economist Diane Swonk says the “only clear way out” for the economy is a “deep recession.”
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Swonk says the Fed is in a bind because the economy is being hamstrung by supply-side constraints.
As the Iran war raises stagflation risks for the global economy, a “deep recession” may be the only way out, says KPMG chief economist Diane Swonk.
In mentioning stagflation, Swonk is referring to a dreaded scenario defined by persistently high inflation and sluggish growth. It can be worse than recession, because the Federal Reserve is unable to comfortably move interest rates in either direction.
Swonk notes the Iran war has driven multiple supply shocks that have resulted in product shortages and higher…
