samchain/econo-pairs-v1 huggingface dataset:
This included more frequent reporting on transactions, data, and information from market participants on Monday. Although conditions remained calm on that Friday, the simultaneous increase and widening dispersion in repo rates and, importantly, federal funds rates on Monday indicated that markets were not effectively distributing liquidity across the system. The New York Fed’s Markets team 1/5  BIS central bankers' speeches  built a timeline and implementation plan in case the Open Market Desk at the New York Fed (Desk) would need to operate on Tuesday. Early Tuesday morning, it became clear that this situation had persisted and had the potential to become more acute. In response to these developments, and in keeping with the FOMC’s standing directive to the Desk to conduct open market operations as necessary to keep the federal funds rate within the target range, on Tuesday morning the Desk announced and conducted a repo operation. Although such operations were common before the financial crisis, this was the first non-test repo operation in many years. This was followed by repo operations each day since. These actions had the desired effect of reducing strains in markets, narrowing the dispersion of rates, and lowering secured and unsecured rates to more normal levels relative to other benchmarks. The experience of the past week drew attention to the possibility of the development of strains in funding markets around the upcoming end of the quarter.

What, I think, is more useful for businesses to hang on to is our expectation that when Bank Rate does rise, it will probably do so only gradually and to a level that is likely to remain materially below its pre-crisis average of 5% for some while – I have something like a 2–3% range in mind here. That reflects three factors. First, the process of private and public balance sheet repair will continue to weigh on domestic demand for some time, while the recovery in the euro area – our main export market – is likely to remain muted. Second, global longer-term safe real interest rates fell in the years before the crisis, reflecting in particular the unusually high saving rates in China, and this is likely to persist. Third, the spreads between risky market interest rates and Bank Rate are unlikely to return to their excessively compressed pre-crisis levels. So even if we start to withdraw some of the exceptional monetary stimulus in the not too distant future, you should not expect Bank Rate to shoot straight back up to pre-crisis levels. It is now five years since we cut Bank Rate to its historic low of 0.5% and launched our asset purchase programme (QE). Those five years have been tough for both businesses and households. But they surely would have been even tougher had we not taken that action.
And, second, when ranking firms’ contributions to the achievement of net zero, look forward as well as back – giving weight to the calibre of their emissions-reduction plans, and their performance over time against those plans. Divestment is a powerful tool, and should remain squarely in the toolkit. But it should be used as a credible threat to reinforce incentives, not an indiscriminate ‘quick fix’. A strategy of engagement works best when the message is big, unavoidable and credible. Here we face a slightly different challenge. The Bank of England’s voice has influence. But the CBPS is not a huge facility. £ may sound like a lot. But it’s small in the world of global capital markets – accounting for just 6.5% of the sterling corporate bond market, 0.5% of total sterling traded assets and a vanishingly small share of global holdings (Table 1). Table 1: The CBPS in context  16  A worked example is given in Section 3 of the Discussion Paper. 8  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  8  What’s more, we are not currently making active purchases, because the MPC’s target stock for the CBPS was reached last year. That means the only scheduled purchases are reinvestments, averaging around a billion pounds a year in the near term. So it’s clear we can’t rely on buying power alone. Table 2: Selected investor frameworks17  But we can still use our position to take a lead, working closely with other like-minded central banks and investors.

And, to the extent the Bank’s actions were influential, the financing costs of high-emissions firms should rise, sending a powerful wakeup call. But indiscriminate ‘portfolio decarbonisation’ of this kind cannot be the best strategy for investors like the Bank seeking to incentivise economy-wide transition to net zero, for two key reasons:  15  MPC Remit statement and letter and FPC Remit letter | Bank of England 7  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  7    First, the high-emissions firms whose bonds we would be selling are the ones we most need to be at the vanguard of emissions reduction. But selling their bonds doesn’t destroy them as assets, it simply transfers them to other investors. And if investors seeking to incentivise transition are all decarbonising, those left holding the bonds are by definition going to be those with a weaker commitment to net zero;    Second, simply selling anything with a high carbon footprint penalises those with strong and credible emissions reductions plans just as much as it does those with no such plans. The net effect therefore is likely to be to reduce, not increase, economy-wide incentives to reach net zero.16 And our end state portfolio, consisting exclusively of firms with low and stable emissions, would by definition play little material role in driving future emissions reduction. I draw two conclusions from this. First, engagement beats disengagement.
Another aspect of EMU governance is strengthening the economic part of EMU. This requires structural reforms aimed at enhancing potential growth, reducing structural unemployment and increasing national economies’ resistance to shocks. While many euro area countries undertook a wave of reforms during the crisis, today, across much of the area reforms have stalled. This is not a uniform picture. Malta is enjoying robust economic growth despite regional headwinds, largely as a result of reforms implemented in recent years that stimulated the development of new areas of economic activity and increased labour participation. Malta has also taken full advantage of its membership of the EU and its adoption of the single currency. Resilience to shocks can also be built up through deeper economic integration. Indeed, as the Five Presidents’ report argues, financial integration helps to share risk across EMU member countries. The completion of a Banking Union, which will strengthen the European banking sector, is a key objective in this regard. In this area, success so far has been partial. The Single Supervisory Mechanism involving the ECB via the Supervisory Board and the national supervisory authorities is up and running, following a comprehensive health check of the euro area banks. The Single Resolution Mechanism is also operational and is being funded according to plan. As regards the third pillar of Banking Union, the European Deposit Insurance Scheme (EDIS), negotiations are still under way. We believe that EDIS is will increase confidence in banks across the euro area.

Although the process of financial integration in the euro area was heavily disrupted in the aftermath of the global financial crisis in 2008 and the sovereign debt crisis in the euro area in 2011, the single currency area has held together. These gains should not be lightly discarded. 1  But the double shock of the financial crisis and the subsequent fiscal crisis has hit EMU hard. The euro area economy is currently in a moderate, gradual recovery that has been under way since the second quarter of 2013. However, in some member states that were hit the hardest by the sovereign debt crisis, output remains considerably below the levels registered in 2008. Unemployment rates diverge considerably across the euro area, ranging from over 20% in Greece to below 4% in Germany. The euro area is facing pressure along four different fault lines. First, there is the tension between euro area member states that are in different cyclical and, in some cases, secular positions and yet face the same nominal interest rate and exchange rate. Second, there is the related tension between monetary policy that is determined at the level of the euro area as a whole and fiscal policy which has remained, in effect, largely national. Third, there are tensions that arise from the fact that the single currency is embedded in an incomplete single market, including only a partial banking union.
A broadly common statutory framework will help home and host authorities work together on resolution planning. To that end, Crisis Management Groups (CMGs) are now in place for nearly all global systemically important firms (or G-SIFIs as they are now commonly called), with the goal of reviewing firms’ proposed recovery plans and developing resolution strategies for them. Firm-specific cross-border cooperation agreements (or CoAgs) are also  2  BIS central bankers’ speeches  being developed, setting out roles and responsibilities of the home and host authorities, clarifying how they will share information, and how they will cooperate to implement their preferred resolution strategy. If home and host authorities are not going to cooperate, we need to flush that out ahead of time, rather than stumble into it in the moment of desperation. There’s a good deal of cultural change entailed here. In the past, supervisors have sometimes seemed during peacetime to be more committed to cooperating than they have been prepared to live up to when it most mattered. A forthcoming FSB consultation paper on developing resolution strategies But we – the FSB – realise that more guidance is needed. Although not of central interest to this audience, resolution isn’t just about banks, and so we are planning to elaborate on how the Key Attributes should be applied to, for example, central counterparties, insurers, and the client assets held by prime brokers, custodians and others.

But when a benign upturn originally driven by FDI in the energy-intensive sector turned into overheating, and fiscal and other demand levers pulled by the Government were either insufficiently used or pulling in the other direction, monetary policy was overburdened and the increased interest rate differential that resulted pulled in further capital and carry trade positions. Let me now turn to the banking part of the story. Before the collapse, the banking system had expanded very rapidly, growing in just five years from a combined balance sheet of less than 2 times GDP at the end of 2003 to 10 times GDP. Most of this expansion was cross-border, and a significant part of it was really off-border, having little to do with Iceland, as both financing and investment took place abroad. Around two-thirds of the balance sheet of the three cross-border banks was denominated in foreign currency. As is typical for banks, the FX part of the balance sheet had a significant maturity mismatch. However, there was no safety net of the type that we have in a national setting to back it up. This turned out to be the fatal flaw in the whole setup, although we now know that these banks were also undercapitalised, which might have done them in at a later stage. But so were several European banks that were considered solid at the time – and some of them are still around!
Simon Potter: The Foreign Exchange Global Code - lessons learned and next steps Remarks by Mr Simon M Potter, Executive Vice President of the Markets Group of the Federal Reserve Bank of New York, at the 2017 FX Week Conference, New York City, 12 July 2017. * * * I would like to thank Christina Getz and Jamie Pfeifer for their excellent assistance in the preparation of these remarks and colleagues in the global central bank and FX community for numerous insightful comments and suggestions. Good morning. It is a pleasure to return to FX Week USA, and I would like to thank FX Week for the invitation. Foreign exchange (FX) market participants play important roles in their interactions with the New York Fed. They act as FX trading counterparties of the New York Fed and they provide information on market conditions to support the Desk’s monitoring of financial markets and transmission of policy. I am pleased to have the opportunity to speak with you today. Before I begin, I would also like to note that my comments today reflect my own views and not necessarily those of the Federal Reserve Bank of New York or the Federal Reserve System. However, remarks on the expectations for FX counterparties reflect the policies of the Federal Reserve Bank of New York. At this event two years ago, I highlighted the important role the FX market plays in facilitating the flow of capital across the globe in support of international trade and investment.

The spectrum of buy side institutions active in FX is particularly complex and varied, encompassing hedge funds, high frequency trading firms, asset managers and corporates among others. The size and complexity of their FX market activities and the nature of those activities may differ significantly. Hearing the viewpoints of many different institutions was critical to delivering a relevant Code for this diverse landscape, recognizing that while the Code applies to all, the details of precisely how it applies may differ. I found that the series of frank debates and discussions that we—market participants and central bankers alike—had over the past two years was an important process in itself, and not just a means to an end. The result was multiple drafts of the Code and, ultimately, a product that more clearly articulated principles and defined terminology. The 55 principles within the Global Code focus on promoting transparency, fairness and mitigating risk across six primary areas–Ethics, Governance, Execution, Information Sharing, Risk Management and Compliance, and Confirmation and Settlement. I would like to highlight a few of these principles to provide a sense of the Code’s content, and use these examples to illustrate some of the fundamental building blocks of a fair, transparent, and efficient market. The Code begins with principles on ethics. The very first principle states that Market Participants should strive for the highest ethical standards. While this is a basic concept, the principle is fundamental and underpins each and every principle that follows.
Indeed, the solvency levels of institutions were not impaired by the faster credit growth because of the increase in Tier 1 and Tier 2 capital. The solvency of institutions was strengthened by the statistical fund, which has grown uninterruptedly since it was created in July 2000. The improvement in earnings and ROE was, as mentioned above, due partly to the high growth in the business volumes of Spanish institutions and especially to lending to mortgage borrowers and to construction and property development firms. In particular, the growth of credit to property developers in 2003 was notable, and was not attributable to just a small number of institutions. It should be taken into account that this lending is markedly cyclical and that in past recessions it has shown high default rates. Moreover, the strong credit growth is an additional cause for concern, basically for two reasons. First, because Spanish household indebtedness is already higher than the euro area average. And second, because the growth of credit extended by institutions is not being accompanied by a commensurate increase in deposits. This produces a greater need for recourse to international financial markets, which may raise the average cost of bank liabilities and hinder profitability gains. BIS Review 39/2004  7  It is therefore not enough to have a strong profit and loss account; instituions must also look particularly hard at the sustainability of their current business model based on strong growth in lending volume, and at the possible alternatives to this model.

This is sometimes known colloquially as r*. Policies which boost r* mean that a given interest rate is likely to impart greater stimulus. Or, put differently, they mean the same level of demand in the economy can be achieved with a higher interest rate. And a “pivot” in the mix of policies, with somewhat less of a contribution from monetary policy and more from structural policies, would probably be desirable. Not least, it could help mitigate any adverse impact of accommodative monetary policies on productivity or the distribution of income and wealth. Conclusion  Productivity is a gift for rising living standards, perhaps the greatest gift. It is not, however, one that always keeps on giving, as recent events attest. Whether in supporting living standards, or in shrinking their distribution, tackling the global productivity puzzle is among the most pressing public policy issues today. If history is any guide, there is unlikely to be any single measure which puts productivity growth back on track. But measures which support the long tail of companies, currently operating at low levels of productivity, have the potential to do considerable good. As Olympic athletes have shown, marginal improvements accumulated over time can deliver world-beating performance. Applying those marginal gains to the population of UK companies could significantly improve UK living standards, even if those are harder to measure than gold medals.
This compares with a 1.5 percent year-over-year rate for the PCE deflator and 1.4 percent rate for the core PCE deflator, which excludes food and energy prices. Low and falling inflation is a problem for several reasons. First, low and declining inflation makes it harder to accomplish needed balance sheet adjustments. That is because, all other things being equal, lower inflation means slower nominal income growth. Slower nominal income growth, in turn, means that less of the needed adjustment in household debt-toincome ratios will come from rising incomes. This puts more of the adjustment burden on paying down debt. 1  Chairman Ben S. Bernanke, Addendum: Addressing the Financing Needs of Small Businesses, Monetary Policy Report to Congress, July 21, 2010. 4  BIS Review 127/2010  Second, and even more importantly, low and falling inflation can cause inflation expectations to decline. This is important because inflation expectations are an important factor that influences actual future inflation. Moreover, when inflation expectations decline, the expected real cost of credit increases – a subject I will return to in a moment. So what could the Federal Reserve do? As I see it, there are two potentially complementary avenues. First, we could take steps to make our current highly accommodative stance of monetary policy more effective in stimulating economic activity by providing additional guidance about what we are trying to achieve today and in the future. Second, we could find ways to increase the amount of stimulus we currently provide via our balance sheet.

In addition, lower long-term rates would reduce the cost of capital for businesses, thereby fostering higher levels of capital spending for any given economic outlook. In considering the limits to balance sheet expansion, there are two constraints – one major and one more minor. The first constraint is the risk that the balance sheet expansion might cause inflation expectations to become unanchored, leading to higher risk premia. This risk is presumably greater in a period in which budget deficits are high, as they are today. 6  BIS Review 127/2010  If exit concerns were to rise as purchases increased, then a rise in inflation risk premia would offset at least some of the expected fall in interest rates. In contrast, the more credible the ultimate exit strategy, the less likely it is that inflation risk premia would go up and the more effective purchases would be in lowering long-term rates. Also, the more credible the ultimate exit plan, the more confident investors would be about the Fed’s willingness to do what is needed to accomplish its objectives. This is important because it would help stabilize longerrun inflation expectations at levels consistent with the dual mandate. The FOMC should be able to assure investors that it has both the means and the will to exit when – but not before – the time is right. That is because the Federal Reserve has the tools to control financial conditions and credit creation even with an expanded balance sheet.
On balance, despite the ongoing financial turmoil, I would argue that financial integration has had a stabilising influence on the global financial system for the reasons just mentioned. 18 If, however, risk assessment and management is inadequate,  16  See Kose, Prasad and Terrones (2005, 2006). 17  The financial market liquidity indicator is constructed to gauge market tightness, depth and resiliency, and liquidity risk premia. 18  The available empirical evidence on how measured financial openness affected the severity of banking crises is somewhat inconclusive. The finance literature argues for a joint consideration of efficiency and stability issues, see Ferguson et al. (2007), ch. 6.3 for references to the literature. BIS Review 9/2008  7  asset valuation is difficult and highly uncertain, and incentives are distorted, the risks to financial stability could increase. The current financial turmoil provides a clear example of how a shock to a relatively small segment of a national financial market can spread globally across borders and across other markets. As early as 2005, US sub-prime loan delinquencies started to rise. Consequently the value of credit products based on sub-prime mortgages rated lower than AA started falling.

Pain, N., I. Koske and M. Sollie (2006), “Globalisation and inflation in the OECD economies”, OECD Economics Department Working Paper No 52, Pula, G. and F. Skudelny (2007), “The impact of rising imports from low-cost countries on euro area prices and labour markets – some preliminary findings”, paper presented at the ECB conference on “Globalisation and the macroeconomy”, July. Reichlin, L. (2006), Panel remarks at the Thirteenth International Conference “Financial Markets and the Real Economy in a Low Interest Rate Environment” Bank of Japan, Tokyo. Rajan, R. (2005), “Has Financial Development Made the World Riskier?” NBER Working Paper No. 11728. Rajan, R. (2006), “Monetary Policy and Incentives”, in Fernández de Lis, S. and Restoy, F., Central Banks in the 21st Century, Proceedings of an international conference sponsored by the Banco de España; Madrid, Banco de España. Rogoff, K. (2004), “Globalization and Global Disinflation”, International Monetary Fund, paper prepared for the Federal Reserve Bank of Kansas City conference on “Monetary Policy and Uncertainty: Adapting to a Changing Economy”, Jackson Hole, Wyoming, 28-30 August 2003. Rogoff, K. (2006), “Impact of Globalization on Monetary Policy”, Harvard University, paper prepared for the Federal Reserve Bank of Kansas City conference on “The New Economic Geography: Effects and Policy Implications” Jackson Hole, Wyoming, 24-26 August. Woodford, M. (2007), “Globalization and Monetary Control”, Colombia University (prepared for the NBER conference on International Dimensions of Monetary Policy, Barcelona, Spain, June 11-13, 2007).