A hydraulic system adapted to recover inertial energy is disclosed. The hydraulic system includes a pump, a variable displacement pump/motor having an input/output shaft, an accumulator, and a valve arrangement. The valve arrangement is operable in: a) a first mode where the variable displacement pump/motor is driven by the pump to rotate the input/output shaft and the load; b) a second mode where the variable displacement pump/motor uses inertial energy from a deceleration of the load to charge the accumulator; and c) a third mode where the variable displacement pump/motor is driven by the accumulator to rotate the input/output shaft and the load. The hydraulic system also includes a controller for controlling operation of the pump, the variable displacement pump/motor and the valve arrangement.