Definition
- Countercyclical policy
- Countercyclical policy moves in the opposite direction to the business cycle, loosening in downturns and tightening in upswings.
- Not to be confused with: Inflation targeting
- Inflation targeting is a rule that requires a central bank to focus primarily on keeping inflation low.
Test yourself
What is the difference between countercyclical policy and inflation targeting?
Inflation targeting says what the central bank aims at; countercyclical policy says which way it leans through the cycle.