It is sometimes pointed out that one of the problems with make-up strategies is that their strict symmetric application may create problems for the credibility of the strategy. For example, if there is a commitment by the central bank to react equally to both inflation undershooting – which, as we have seen, are the really problematic deviations in the current context – and overshooting, we could find that, following a period of above-target inflation the central bank would have to reduce inflation below the target, which would require depressing economic activity and employment. Given that such a commitment may not be entirely credible, it has recently been proposed that such strategies be temporary. In other words, the central bank operates normally within a traditional inflation targeting framework, but, in the event of a low inflation crisis driving  12  See Banco de España (2020a) for a detailed discussion of make-up strategies. 16  interest rates close to their lower bound, it commits to a make-up strategy to recover the “lost inflation” over that period in the future.13 Against this background, in late August 2020 the Federal Reserve announced the main findings of its strategic review. Among other changes, it has adopted a new asymmetric average inflation targeting strategy, albeit without specifying some of the parameters of this strategy, such as the length of the period over which the average inflation to be stabilised is calculated.
29  These percentages should be considered as the lower bound of the total impact of the interest rate rise, as this would also reduce agents’ income, through its negative impact on economic activity, and would curb the accumulation of wealth on account of the higher net interest burden. 30  Moreover, these were the households whose energy expenditure increased the most, as a proportion of their consumption, in 2020 and 2021. 15  High debt levels also mean that public finances are more sensitive to interest rate movements. However, the low interest rate levels of recent years have led to a continuous decline in the interest burden as a percentage of GDP, while at the same time, longer average debt maturities have limited the short-term impact of higher issuance costs. Under a scenario of gradual interest rate rises consistent with the latest projections, the debt burden is expected to stabilise as a percentage of GDP. Under that same scenario, an additional 100 bp increase in short and long-term interest rates, with all other variables remaining constant, will drive up interest payments by 0.4 pp of GDP by 2024. 16  In the Spanish banking industry stress tests, two potential stress scenarios – dubbed adverse and severe – were simulated for the period 2022-2023.