Apollo warns: Slowing growth and stubborn inflation coexist, the Federal Reserve is concerned about the risk of stagflation in 2026

The Zhitong Finance App learned that Apollo Asset Management's chief economist Thorsten Slocke said that when looking ahead to 2026, Federal Reserve officials are increasingly paying attention to the risk of stagflation. This risk is reflected in a situation where slowing economic growth and rising prices coexist.

Slock's views reflect the way policymakers described economic risk in forecast reports prepared before the Federal Open Market Committee (FOMC) meeting.

As part of this process, FOMC participants were asked to determine whether the risk of inflation and unemployment is biased upward or downward relative to their benchmark outlook. Recent forecasts show significant changes: Officials generally agree that both inflation and unemployment are at greater upward risk, a highly unusual and worrying combination.

Slock pointed out that these assessments indicate that the Federal Reserve is worried that there will be a period where price pressure cannot cool down even if labor market conditions weaken. Such an outcome would complicate monetary policy and limit the ability of the Federal Reserve to stimulate growth without increasing inflation.

Although the Federal Reserve's benchmark forecast does not assume stagflation as the most likely outcome, the balance of risk suggests that policymakers are preparing for this possibility. For investors, this message seems to underscore that the economic path into 2026 may be challenging, with uncertainties about growth, employment, and inflation.