Apollo Global Management LLC's Chief Economist Torsten Slok has indicated that Federal Reserve officials are increasingly focused on stagflation risks when looking ahead to 2026. This risk scenario involves a combination of slowing economic growth alongside persistent price increases.

Slok's perspective reflects how policymakers are characterizing economic risks in forecast reports prepared ahead of Federal Open Market Committee (FOMC) meetings. As part of this process, FOMC participants are required to assess whether inflation and unemployment risks skew upward or downward relative to their baseline outlook. Recent projections reveal a notable shift: officials broadly perceive greater upside risks for both inflation and unemployment—an unusual and concerning combination.

Slok noted that these assessments suggest the Fed is wary of entering a period where price pressures fail to ease even as labor market conditions weaken. Such an outcome would complicate monetary policy, limiting the central bank's ability to stimulate growth without exacerbating inflation.

While the Fed's baseline forecast does not assume stagflation as the most likely scenario, the balance of risks indicates policymakers are preparing for this possibility. For investors, this message underscores that the economic path into 2026 may prove challenging, with uncertainties surrounding growth, employment, and inflation.