samchain/econo-pairs-v1 huggingface dataset:
We made the judgement that the risks to demand were such that, even allowing for the weaker exchange rate and any immediate effects on supply, Bank rate should be reduced. But there’s no inevitability about the balance of these effects. I’ve described how the current inflation is in part the result of a divergence between the effective expectations of consumers and those in financial markets. If those expectations were to re-converge, from either end, inflationary pressure would diminish. If they diverge further the opposite would happen. Firms’ expectations will affect their investment and purchasing decisions, and these in turn can have an impact on productivity. Some of those effects could come through faster than people often assume. If they do, then even the argument that Brexit lowers growth and therefore interest rates isn’t watertight. And, to add something else to these risks, something I haven’t dealt with in this speech, a sudden switch to WTO trading rules would involve the immediate imposition of tariffs on imports, further raising their cost. Predicting others’ predictions isn’t easy, and I don’t think the balance of risks to inflationary pressure, and therefore future interest rates, is obvious. In the meantime, the MPC has little choice, it seems to me, but to take the economic data at face value. To adapt the football manager’s cliché, we can only play the economy that’s in front of us. What’s been in front of us for several months is an economy with above-target inflation and dwindling spare capacity.

Brexit and interest rates Speech given by Ben Broadbent, Deputy Governor Monetary Policy  London School of Economics 15 November 2017  I’d like to thank Mette E. Nielsen and Konstantinos Theodoridis for their valuable research assistance. I am also grateful for helpful comments from other colleagues. The views expressed are my own and do not necessarily reflect those of the Bank of England or other members of the Monetary Policy Committee. 1  All speeches are available online at www.bankofengland.co.uk/speeches  Introduction and summary Hello! It’s a real pleasure to come to the LSE to give this talk. It’s a great institution; I’m fortunate to have many friends here; last, but not least, it’s barely a hop and a skip from my office. So thank you for having me. It won’t have escaped your attention that the MPC raised interest rates earlier this month. It did so, in part, because of the referendum-related decline in sterling’s exchange rate. That has pushed up CPI inflation and will continue to do for some time yet, as the rise in import costs is passed through to retail prices. Our remit says we can accommodate such effects, and take our time in bringing inflation back to target, but only so long we also think there’s spare capacity in the economy. As unemployment has declined that position has become harder to maintain. We’ve been communicating this message for some time now.
It would take too long in this context to analyse what conclusions should be drawn for the future, and it is probably too early to do so yet, but I shall nevertheless share my impressions this far. In conclusion, I shall discuss how monetary policy can complement the more acute financial measures taken, and alleviate the effects of the financial crisis on the real economy. Acute financial crisis… The turn for the worse can be clearly dated to the middle of September when US investment bank Lehman Brothers was forced to file for bankruptcy protection. Money market participants had not expected such a prominent bank to default. When the bank nevertheless defaulted, fears grew that more participants risked the same fate. This was when the confidence crisis broke out in earnest. No one dared to lend money to anyone else because of fears that the other party could become insolvent and the money that had been lent would disappear. Investors preferred to put their money in government securities. One result was that interbank lending around the world more or less ceased. The difficulties the banks had experienced earlier with financing at longer maturities were intensified. The banks’ borrowing costs increased further and companies outside of the financial sector also experienced financing difficulties. At the same time, the large US commercial paper market suffered substantial disruptions. This market is an important source of financing, both for financial companies and ordinary industrial companies.

3  See, for example, Press Briefing on Q4 2012 Household Debt and Credit Report; Meta Brown and Sydnee Caldwell, “Young Student Loan Borrowers Retreat from Housing and Auto Markets Liberty Street Economics  4  BIS central bankers’ speeches  close look at the question of just how weak today’s labor market is for new college graduates by putting their recent experience into context using some hard data. It is important for us to undertake this kind of analysis because, as we’ll show, newly minted graduates always take some time to transition into the labor market and find jobs that utilize their education. And young people with college degrees still fare far better than those without. At the same time, with the sluggish jobs recovery from the recession, it’s clear that the transition of recent graduates into the labor market is taking longer, and they’ve experienced higher unemployment and higher underemployment than in years past.4 Still, while times have gotten tougher for recent graduates, we shouldn’t be too hasty in concluding that getting a college education won’t help people find good jobs. I will now ask Jason Bram to present an update of economic conditions in our region. Blog Post, April 17, 2013; and Andrew Haughwout, Donghoon Lee, Wilbert van der Klaauw, and Joelle Scally, “Just Released: The Geography of Student Debt,” Liberty Street Economics Blog Post, May 14, 2013. 4  Underemployment, for purposes of this presentation, refers to college graduates working in jobs that typically don’t require a college degree.
So many of you may think that you have earned a train ticket for a smooth journey to the place you are destined to go: Success. Is it so? 3. I am not sure if I know the answer, but let me depict a different scenario for you to think about. Let’s say you have a train ticket that would enable you to go through the admission gate of the train station and reach the train platform. When you are there you immediately realise that there are many trains waiting to depart. Your ticket doesn’t really tell you which train you should board and the signs on the trains are not clear either. So you will have to decide which train you should get on, without knowing whether this particular train is indeed the right one that can take you to your desired destination. But this is not the worst part. When you get on the train, you find that there are already lots of people there and that there is no seat assigned to you. All the window seats have been occupied. So you have to struggle to find a seat for yourself. And this is not the end of the story. 4. After you have settled down on your seat and begin to feel comfortable, you would expect or hope for a smooth and swift journey to your final destination: Success – however you define it. To your big surprise, this is not what it is going to be.

5 Richard H. Clarida, Vice Chair of the Board of Governors of the Federal Reserve System, The Federal Reserve’s  Review of Its Monetary Policy Strategy, Tools, and Communications Practices , speech delivered at the Federal Reserve Bank of Minneapolis, April 9, 2019. 3/3  BIS central bankers' speeches
When these sorts of widespread assumptions – these financial myths – turn out to be wrong, most financial-market participants find themselves poorly positioned for the resulting shocks. The result is insolvency of groups of firms and substantial uncertainty – uncertainty about the exposure of many firms to direct losses, or to indirect losses created by their counterparty exposure to other firms that suffer direct losses. These so-called financial myths are not unique to this time period, or to this country. I would like to briefly mention two among the numerous examples from recent history – examples where financial myths were important in helping to create a potential crisis. The first example involves the assumption of many in Japan that real estate prices could not fall in the late 1980s. The second involves the assumption, in the late 1990s, that the Internet had completely changed how we should think about company valuation. I will then briefly mention four financial myths that played critical roles in the recent financial crisis.

So what followed was an era of ultra-cheap credit globally – the Heineken era, in which credit reached the parts of society it previously had not reached. Levels of debt, in particular among households, rose pretty much exactly in line with levels of inequality. Rising credit meant expanding bank balance sheets. To maintain this expansion, banks began to manufacture new financial products, slicing and dicing loans to meet investor demand for high yield. The acronyms we have now come to know and loathe – the CDOs, the ABSs and the CDOs of ABSs – emerged to meet this demand. Manufacturing high-tech loans was a lucrative business. Returns to banking rose to their highest levels since the roaring ‘20s. Those designing and selling these new financial gadgets saw their salaries sky rocket. In 1980, an investment banker was paid roughly the same as a similarly-skilled professional in any other industry. By 2007, they were earning nearly four times as much.1 Those salary differences were particularly pronounced at the top of the pyramid. In 1989, the CEOs of the largest US banks earned 100 times the median US household income. That is quite a gap. Yet by 2007, that multiple had risen to 500.2 A similar gap emerged for UK and European bank CEOs. These widening discrepancies within banks compounded the widening discrepancies between banking and other industries. Banks, especially the top of banks, became first among unequals.
The share of GDP in quarantined areas has moved from 11% to 52% in the same period. Page 1 of 3  Central Bank of Chile June 2020  11. This has intensified the impact on economic activity. GDP growth remained in positive ground in the first quarter, but economic activity declined 3.5% in March and 14.1% in April. Figures are likely to be worse for May and June in line with the broadening of lockdowns. Central Bank estimates from last week set the contraction of GDP between -5.5% and -7.5% in 2020, with the range broadened to take into account uncertainty around the persistence of constraints. 12. Assuming that constraints will begin to roll back in the third quarter, we estimate GDP to grow between 4.75% to 6.25% in 2021, and 3%-4% in 2022. 13. While the drop in GDP in 2020 will be the deepest in 35 years, prospects remain better than in other Latin American and Caribbean (LAC) countries. This owes to five factors: a. Structural factors are more favorable than in other EMEs. Chile has a deeper domestic financial market, where institutional investors play a major role; remittances have never been a source of foreign revenue, and the composition of foreign trade means that the terms of trade are improving rather than worsening. Even the informal sector, while bigger than in advanced economies (AE), at 30% of the labor force is smaller than it is in other LAC countries. b.

Taking advantage of this opportunity wisely can benefit exporters immensely. The second source of opportunities is the upcoming regional economic integration. With the advent of the ASEAN Economic Community (AEC), intra-regional trade volume will grow given that more trade barriers are removed. With its geographical advantage, especially its proximity to the vibrant CLMV countries, Thailand gets a head start in positioning itself as an investment and production hub for the AEC, although this requires continued efforts on minimizing regulatory burdens for businesses and increasing regional connectivity by strategic investment in logistics and transportation systems. After all, combining the capital and the technology of more advanced members with the cost advantage of newer members will result in a synergy that benefits the region as a whole. It should be noted, also, that the rising significance of intra-regional trade will serve the region well as an additional buffer against weak global environments. 4  BIS central bankers’ speeches  To support Thai businesses to seek investment opportunities abroad, the Bank of Thailand continues to gradually relax capital flow regulations, initially on outward direct investment and more recently on portfolio investment for Accredited Investors. On a related note, to facilitate banking integration, ASEAN central banks are also in the process of negotiating the common standard of Qualified ASEAN Banks (QABs), which will allow qualified banks to expand into other ASEAN countries with greater ease.
Notes: Net percentages are defined as the difference between the sum of the percentage of banks responding “tightened considerably” and “tightened somewhat” and the sum of the percentage of banks responding “eased somewhat” and “eased considerably”. The net percentages for responses to questions related to contributing factors are defined as the difference between the percentage of banks reporting that the given factor contributed to a tightening and the percentage reporting that it contributed to an easing. “Cost of funds and balance sheet constraints” is the unweighted average of “costs related to capital position”, “access to market financing” and “liquidity position”; “risk perceptions” is the unweighted average of “general economic situation and outlook”, “industry or firm-specific situation and outlook/borrower’s creditworthiness” and “risk related to the collateral demanded”; “competition” is the unweighted average of “competition from other banks”, “competition from non-banks” and “competition from market financing”. The latest observations are for Q1 2020. Our monetary policy measures, together with the contribution from the announcement of public credit guarantees in many countries and other direct and indirect support for firms and households, are contributing to the protection of bank-based credit flows. Banks have indicated that TLTRO III is having a net easing impact on the terms and conditions offered to borrowers and a positive net impact on their lending volumes, particularly on their expected lending volumes over the next six months (Chart 17).

It could amplify the moral hazard problem: if the bank wins, its shareholders - as well as its traders under their bonus packages - pocket the profit, and if it loses, the regulator/tax-payer ends up with the bill. A penalty would not act as a deterrent to a bank prepared to gamble its capital because that bank would not be affected by such a penalty when it was ‘down and out’. Furthermore, regulators could over time become less familiar with banks’ risk management systems, which might make them less effective in a crisis. Early supervisory intervention is more difficult if supervisors only become aware of problems ex-post, after the limit has been breached. It may be possible to devise an approach to pre-commitment which avoids these potential handicaps. But for the time being our attitude remains somewhat hesitant. Finally, a discussion about rules is not complete without touching on the question of a ‘level playing field’; an odd analogy, I think, since in field sports there is no such thing. If there were, why would teams change ends at half time? (In American football, of course, teams change ends three times - and in baseball they resolve the problem by running round in circles.) When banks and securities houses do similar business it seems only fair to apply similar capital rules. But while this is true at the margin, when we look at the total business of banks and securities houses, the picture is still vastly different.
Developments are weaker in the euro area – unemployment remains high and consumer confidence has fallen. In Japan, it appears that growth will be positive from the fourth quarter of 2004 to the first quarter of 2005. Growth in Asia, except Japan, and in Central and Eastern Europe is expected to moderate but to remain strong. The outlook for growth in different regions indicates that the imbalances in the global economy, with large deficits in the US and large surpluses in some other countries, will persist. Low growth in the euro area and Japan is weakening the prospect of a gradual correction. This increases the risk associated with these imbalances. Increased imbalances in addition to high oil prices and volatile oil markets are contributing to the uncertainty surrounding developments in the global economy. There are particularly large imbalances in the US balance of trade and current account. This partly reflects the US federal budget deficit. Moreover, US households have a high level of consumption and a low level of saving. Strong demand in the US has sustained growth in the world economy. The deficit in the US is matched by surpluses in Europe and Asia. A persistent deficit has pushed up US foreign debt to a high level. The US population is growing faster than that of other OECD countries. This may suggest that saving in the US is somewhat lower and investment somewhat higher than in other countries, but the impact is now considerably greater than implied by demographic factors alone.

The unexpected increase in petroleum investment contributed to an economic upturn that was substantially stronger than projected. If oil prices rise further or remain at the current high level for a long period, petroleum investment may again amplify the cyclical upturn to a greater extent than projected. The upturn in mainland fixed investment is broadly based. Improved profitability, higher capacity utilisation and solid export growth will contribute to continued investment growth in goods-producing industries. Demand for services is expected to continue to expand for a period ahead with an attendant increase in investment in service sectors. When growth in the economy gradually slows, investment growth will probably slacken. Mainland exports of goods and services will continue to benefit from solid global growth this year. Later in the period, a continued loss of market shares as a result of high cost levels will dampen export growth. Growth in private consumption is expected to remain high this year and next. Low real interest rates, solid growth in real disposable income and a continued rise in house prices will contribute. BIS Review 34/2005  3  Unemployment is projected to decline this year and next. In subsequent years, growth in demand and output is expected to ease and unemployment may edge up again when capacity utilisation approaches a more normal level. With a somewhat tighter labour market and rising inflation in the years ahead, wage growth may pick up.
•  And of course, the various financial services supervisors have pursued a number of cases in the public arena. I will say a bit more about the approach of the banking supervisory agencies in a minute. What does this mean for the individual firm? But first, what do these developments mean for the individual firm? The single strongest message I would leave is that compliance risk management needs to be heavily reflected in each firm’s governance structure and approach. Let me mention a few elements of a strong firm-wide compliance program, most of which are longstanding supervisory expectations. •  To begin with, active board and senior management oversight is, of course, critical. It is extremely important to have the right tone at the top, communicating that compliance is a firm-wide priority and that business lines, along with compliance professionals, are responsible for ensuring compliance. Incentive structures should be in place to encourage appropriate performance. •  Second, the firm should establish and maintain sound compliance risk policies, procedures, and internal controls - based on risk assessments of its businesses, and incorporating limits as needed. These components have often been embedded within dynamic and proactive enterprise-wide risk management processes that look at compliance in broader terms than adherence simply to various specific laws and regulations. A strong compliance and reputational risk management program includes that employees meet corporate standards for doing business. It should also include a mechanism to ensure critical review of high risk transactions.

In these cases, the Federal Reserve will disseminate information by issuing written guidance, or by communicating its high-level findings from horizontal reviews of bank operations which may help the industry adjust its practices. I will leave you with two brief final points. •  First, we all need to assume that managing legal and reputational risk will remain a challenge going forward. It is highly unlikely that the rapid pace of innovation and crossborder expansion will slow down, and further legal and regulatory changes are always to be expected. •  But second, and to end on a positive note, I do think that the interests of the private sector in maintaining the long-term integrity of franchises - and the official sector - in ensuring integrity of market practices - significantly coincide. This should encourage continued collaboration and dialogue and a more transparent and effective approach to the setting of expectations and developing of standards. Thank you very much. BIS Review 76/2006  5