An absence of significant economic slowdown doesn't mean no signs of stagflation risks. Here's why
A television station broadcasts Kevin Warsh, chairman of the US Federal Reserve, speaking after a Federal Open Market Committee (FOMC) meeting as a trader works on the floor of the New York Stock Exchange (NYSE) in New York, US, on Wednesday, Sept. 16, 2026.
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Keep watch for signs of stagflation, even if there isn’t a significant slowdown in the economy, according to J.P. Morgan.
If oil stays above $100 a barrel over an extended period of time, it risks marking the start of a stagflation period, though economic growth may not necessarily slow down significantly, said James Sullivan, managing director and co-head of global fundamental research at J.P. Morgan, on CNBC’s “Squawk Box Asia.”
“Reasonable levels of economic growth with higher levels of inflation start to trigger this stagflation conversation for the first time really since the 70s,” he added.
According to Sullivan, record issuance in the AI industry and more governments running into record-level deficits “will absolutely have an impact on pricing,” especially in an environment of weaker demand.
“More and more investors with longer-term views look into the corporate space rather than in the government space,” Sullivan said, noting that there is a mismatch of supply and demand.
Moreover, the effects of El Niño and the Middle East conflict are also weighing on the global economic outlook.
“One of the reasons why you’ve seen really one of the first coordinated central bank tightening cycles in many many years is triggered by exactly that,” Sullivan said, adding that food and energy prices have been rising.
“At the same time that core inflation has been relatively sticky, we don’t necessarily see that environment turning around in the short term,” Sullivan noted.
