7  Procyclicality In the current context, financial stability risks interact with the issue of procyclicality. The failure of the traditional Phillips curve relation between the business cycle and inflation to thus far assert itself makes monetary policy increasingly procyclical. Economic growth in the euro area passed its cyclical trough in the first quarter of 2013, while core inflation bottomed out early 2015.
New Zealand is also well positioned with a strong backbone of primary production and processing, to both support us through lockdown and provide important foreign earnings. However, like all economies in the world, we also harbour vulnerabilities to the COVID-19 pandemic. These vulnerabilities include our reliance on services with face-to-face interaction such as hospitality, tourism, and education.