In this respect, if financially vulnerable firms are defined as those that are unable to regularly pay the interest on their financial debts out of ordinary and interest income, it is observed that the relative weight of debt associated with vulnerable firms has fallen continuously since 2013, down to levels in 2018 very similar to those recorded in 2008. At the same time, it is estimated that in a hypothetical adverse scenario in which corporate profits continue to decline (on a scale, for example, equivalent to half of the decline observed in the last crisis, between 2008 and 2012), the consequent increase in vulnerability would be comparatively less intense than that which would have occurred in 2008 in response to the same adverse shock, reflecting today’s lower level of corporate indebtedness. That said, some types of firms and sectors may still have a significant degree of vulnerability to the deterioration of the environment, according to the strength of their financial position and the nature of the possible shocks. 22/29  In the case of households, their indebtedness as a proportion of GDP has also declined very significantly, by 28 pp from the peak recorded in 2010. Accordingly, at 58.3% at present, it has now practically converged with the euro area figure. The latest data indicate that total household financing was practically steady in September, in year-on-year terms, with a slight deceleration since the start of the year. By component, we can see significant divergence between credit for consumer goods purchases and credit for house purchases.
The precise objective of policy - even within the confines of the concept of price stability - remains a political decision: there will always be those who argue for a somewhat higher or somewhat lower target, and the fact that the Government endorses a precise target rather than just the vaguer goal of “stability” certainly strengthens our hand by allowing us to concentrate upon our essentially technical task. I am bound to say that in practice it seems to me to be rather a second order issue anyway given the narrowness of the range of definitions of “stability” that would carry conviction with the public, including financial markets. The Act confers the responsibility for meeting the Government’s inflation target specifically on a newly created Monetary Policy Committee, comprising myself as Chairman, the two Deputy Governors, two Executive Directors appointed by the Governor after consultation with the Chancellor and four members appointed from outside the Bank by the Chancellor. The Governors are appointed as members of the Committee for their full five year (renewable) terms; the remaining members are appointed for three year terms which are also renewable. The Committee’s policy meetings are also attended by a senior Treasury Official in the capacity of an observer, who may participate in the discussion - essentially to inform the Committee of any relevant aspects of the Government’s wider economic policies and explain the Committee’s thinking to the Chancellor - but he may not express a view on the monetary policy decision or, of course, vote on that decision.