Inflation target and Interest rate shock: Difference between pages

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1. ''UK - Bank of England''.
A change in interest rates, used to analyse interest rate risk.


:"To keep inflation low and stable, the Government sets us an inflation target of 2%. This helps everyone plan for the future.


:If inflation is too high or it moves around a lot, it’s hard for businesses to set the right prices and for people to plan their spending.
The simplest form of interest rate shock used in modelling is a change which is:


:But if inflation is too low, or negative, then some people may put off spending because they expect prices to fall. Although lower prices sounds like a good thing, if everybody reduced their spending then companies could fail and people might lose their jobs.
*Immediate; and
 
*Permanent;
:If we miss the inflation target by more than 1 percentage point either side of the target, we must tell the Government why."
*And which affects all interest rates by an equal amount.
 
:''Bank of England, June 2020''.
 
 
2.
 
Similar goals and measures in other jurisdictions.




== See also ==
== See also ==
* [[Bank of England]]
* [[Interest rate risk]]
* [[Financial stability]]
* [[Non-parallel shock]]
* [[Inflation]]
* [[Parallel shock]]
* [[Monetary policy]]
* [[Shock]]
* [[Monetary Policy Committee]]
* [[Monetary Policy Report]]
* [[Official Bank Rate]]
 
 
==External link==
*[https://www.bankofengland.co.uk/monetary-policy/inflation The UK's inflation target - Bank of England]


[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:Corporate_finance]]
[[Category:Investment]]
[[Category:Identify_and_assess_risks]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]

Latest revision as of 16:47, 1 July 2022

A change in interest rates, used to analyse interest rate risk.


The simplest form of interest rate shock used in modelling is a change which is:

  • Immediate; and
  • Permanent;
  • And which affects all interest rates by an equal amount.


See also

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