As a result, the output gap has improved and inflation has accelerated. Looking ahead, with this mechanism at work, the year-on-year rate of increase in the CPI and inflation expectations are expected to increase.
8 The extended cycle provides administrative burden relief for these institutions and recognizes the different risks that they typically pose— especially compared to the largest and most complex firms, whose failure poses the greatest risk to the real economy. Even with this change, the stress tests remain a core part of our supervision of these firms.