Inflation target and Procyclical: Difference between pages

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1. ''UK - Bank of England''.
1.


:"To keep inflation low and stable, the Government sets us an inflation target of 2%. This helps everyone plan for the future.
In [[business cycle]] theory and finance, any economic quantity that is positively correlated with the overall state of the economy.  


: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.
Any quantity that tends to increase when the overall economy is growing.


: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.


:If we miss the inflation target by more than 1 percentage point either side of the target, we must tell the Government why."
2.


:''Bank of England, June 2020''.
The additional amplification effects resulting from the structure of the financial system.


The performance of banks tends to be procyclical. They thrive when the economy is strong, and suffer disproportionately when the general economy is weak.


2.
This is a problem, because it can amplify financial instability.


Similar goals and measures in other jurisdictions.
Basel III sought to address the problem of the procyclicality of the largest banks' capital, by requiring them to hold countercyclical capital buffers.




== See also ==
The opposite of procyclical is ''countercyclical''.
* [[Bank of England]]
* [[Financial stability]]
* [[Inflation]]
* [[Monetary policy]]
* [[Monetary Policy Committee]]
* [[Monetary Policy Report]]
* [[Official Bank Rate]]




==External link==
== See also ==
*[https://www.bankofengland.co.uk/monetary-policy/inflation The UK's inflation target - Bank of England]
* [[Bank]]
* [[Basel III]]
* [[Buffer]]
* [[Capital]]
* [[Capital buffer]]
* [[Countercyclical]]
* [[Countercyclical buffer]]
* [[Cyclical]]
* [[Economy]]
* [[Procyclicality]]
* [[Prudential]]
* [[Supervision]]
* [[Total Loss Absorbing Capacity]]


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

Latest revision as of 08:48, 1 December 2023

1.

In business cycle theory and finance, any economic quantity that is positively correlated with the overall state of the economy.

Any quantity that tends to increase when the overall economy is growing.


2.

The additional amplification effects resulting from the structure of the financial system.

The performance of banks tends to be procyclical. They thrive when the economy is strong, and suffer disproportionately when the general economy is weak.

This is a problem, because it can amplify financial instability.

Basel III sought to address the problem of the procyclicality of the largest banks' capital, by requiring them to hold countercyclical capital buffers.


The opposite of procyclical is countercyclical.


See also

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