samchain/econo-pairs-v1 huggingface dataset:
This is the assumption used in the illustrative scenario in Section 3 of the Bank’s 2021 discussion paper New forms of digital money | Bank of England, and reflects the share of UK deposits that is non interest bearing. 2  Bank of England  Page 4  Sources: Individual central banks’ published data, IMF, Bank calculations. Those are big numbers. But they aren’t unprecedented in the history of central banking. In the UK, even the top end of the range in Chart 1 would still leave the stock of publicly-provided means of payment at around the levels seen in the mid-20th century (Chart 2). This underscores the point that, while the technology for any future CBDC may be new, the use of the central bank balance sheet to provide state-backed transactional money would not be: indeed, it is one of the oldest functions of central banks. Bank of England  Page 5  Sources: Bank of England, IMF. 2. Stablecoins that are truly stable may have much the same impact As public authorities reflect on the case for CBDCs, private sector providers have been developing so-called ‘stablecoins’, which claim to be pegged to the value of fiat currencies. I say ‘claim’, because recent weeks have suggested such promises may be less than fully credible. The value of TerraUSD – once one of the larger ‘stablecoins’ by market capitalisation – fell to zero in just a few days.

Nowadays, the SNB and the commercial banks together provide the economy with money. Through credit creation, the banks are in a position to create book money, only a small part of which they are required to cover with SNB sight deposits. In everyday life, this book money – for instance deposits in salary accounts – is generally accepted in the same way that cash is accepted. A plain money system would mean that banks had to cover 100% of their book money with SNB sight deposits. The people behind the initiative believe that this would simplify monetary policy because a plain money system would allow the SNB to manage the money supply with utmost precision. Moreover, plain money is thought to increase the stability of the financial system because deposits are secured by SNB sight deposits. In addition, profits from money creation would accrue fully to the SNB and no longer, in part, to the banks. Although the idea of plain money may be interesting in certain respects, I am sceptical as to whether acceptance of the initiative would result in better money. My reticence is born not only of considerable doubts as to the anticipated benefits of plain money, but far more because the introduction of plain money would constitute an enormous experiment for which we lack any experience or comparative figures from the past. Never in monetary history has a country introduced plain money based on central bank money. Assumptions which appear plausible could therefore prove to be incorrect.
Financial sector repair There is considerable empirical evidence that a strong driver of aggregate productivity growth is “churn” between firms – less productive firms exiting the market and new innovative firms entering, or existing firms reallocating resources to more productive sectors.3 The job of the financial sector is to ensure that credit allocation supports this process. However, what seems to have happened, at least in parts of the euro area, is that banks with weak balance sheets have retarded this process. One recent study found that larger banks have reallocated credit away from riskier firms, preventing new entrants, while smaller banks have engaged in so-called ever-greening of loans, inhibiting firm exits.4 Weak banks also appear to have slowed down sectoral reallocation. To give just one example, despite the recent improvements in cost and price competitiveness in Greece, the sectoral allocation of credits has not substantially shifted towards export-oriented firms.5 This suggests that banks in certain euro area countries are not facilitating sufficiently the shift towards more productive sectors. Financial sector repair therefore has to be at the core of any policy to raise euro area growth potential. And to ensure that lending is directed towards productive activity, in my view there are two policy priorities. The first is to strengthen bank balance sheets – that is, for losses to be properly acknowledged and for adequate recapitalisation to follow.

Here the key issue is to avoid that rising long-term unemployment and structurally low investment create hysteresis effects. The second challenge is how to raise potential growth in a durable way. In line with my broad definition of potential growth, recent research has suggested that pre-crisis estimates may have been overstated by effects linked to the financial cycle.2 In other words, after incorporating information on the unsustainable developments in real interest rates, credit growth and property prices that characterised the 2003–08 period, potential output may have been lower than we thought. A return to the status quo ante may not therefore be enough to restore high levels of sustainable employment. These challenges are interrelated because, to the extent that we can achieve an upward shift in the future growth potential, it will affect growth expectations today. This might induce firms and households to frontload consumption and investment decisions, thus helping lower the risk of hysteresis effects. And vice versa, if there is no prospect of higher growth in the future, we could fall victim to self-fulfilling negative expectations. For this reason, I see policy action on both fronts as urgent. And there are three policy areas that I see as relevant: monetary policy; financial sector repair; and, most importantly, structural reforms. How can we raise potential growth? Monetary policy We know that monetary policy can help buy time for necessary structural measures to be implemented. Going beyond that, it may seem strange to include monetary policy in a discussion of potential growth.
To be clear, such house price growth relative to earnings would not be at all unusual for the UK – over the five years leading up to the crisis, house prices grew at three times the rate of income growth and there were about 70% more mortgage approvals per month than we have seen since 2014. And in the late 1980s, house prices again grew at well over twice the rate of earnings. 11  All speeches are available online at www.bankofengland.co.uk/news/speeches  11  Chart 6. LTI distribution of new mortgage lending(a)(b)  Sources: FCA Product Sales Database and Bank calculations. (a) The Product Sales Database includes regulated mortgages only. (b) LTI distribution of new mortgage lending in 2016 Q4 and at the end of an ‘upside’ 7-year scenario, with or without FPC Recommendations in place. There is a separate but related question about the extent to which the relatively subdued evolution of house prices and transactions between 2014 and 2019 was due to the FPC’s policy, including a general signalling effect on indebtedness. But general economic developments (for example, weaker than forecast economic growth, the post referendum inflation squeeze on incomes, and general Brexit uncertainty) and housing policies beyond the central bank (such as changes to Buy-to-Let tax treatment) have probably played the bigger role. And the flow limit of 15% has never ‘bitten’ in aggregate – since the policy was introduced flows of new mortgages at or above four and a half times income have not exceeded 11%.

While Bank Negara Malaysia will continue to strengthen the consumer protection framework through enhanced disclosure standards, effective dispute resolution mechanisms, and promotion of fair practices, banking institutions must also play their role. An important aspect is to ensure that consumers are adequately equipped with the relevant information to minimise the risks of poor financial decisions and their consequences. Market practices and disclosure standards must be fair and comprehensive so as to ensure that consumers are treated equitably and have access to adequate and timely information to facilitate effective decision-making. Ladies and Gentlemen, In this recent year, Bank Negara Malaysia has put in place two important infrastructures within the banking sector, the first being the framework for the establishment of Islamic subsidiaries, and secondly, the merger of commercial banks and finance companies within the same banking groups. These frameworks have paved the way for banking institutions to further rationalise their operations and improve efficiency. Both allow for the operations to be now undertaken within a new structure where the operations will be able to leverage on the group infrastructure, including the branch network and the support functions, to maximise cost efficiency and reap the benefits of group synergies. A number of banking institutions have already capitalised on the opportunities provided by these frameworks. Going forward in 2005, Bank Negara Malaysia will finalise a number of key regulations for the banking system.
We all know that stable conditions make it easier to arrive at wise economic decisions. When wages and prices chase each other in an unpredictable way, and both interest rates and the exchange rate fluctuate widely as a result of this, with a certain amount of luck or smartness it is sometimes possible to do good business. But most people surely realise that this is not the best setting for either long-term investment or for those who have to live on an earned income or a pension. The head of the US Federal Reserve, Alan Greenspan, has formulated his view of what monetary policy’s objective should be in roughly these words: inflation should be so low that economic agents do not have to worry about it. Limited room for employment policy Why, then, are there those who still argue that higher inflation would be a good thing? I believe this is mainly because they perceive a conflict between price stability and low unemployment. This perception in turn has its roots in a short-run, cyclical perspective. When economic activity is rising or falling on account of transitory demand fluctuations around a long-term trend, this negative relationship does exist. Rising demand for goods and services generates increased demand for labour and lower unemployment; this tends to be accompanied by rising wages and higher inflation. The opposite also applies. But this does not mean that higher inflation results in permanently higher employment and lastingly lower unemployment.

This dynamic is augmented in jurisdictions like Malaysia, where the central bank is responsible for promoting both monetary and financial stability. If we were to go completely cashless, central banks might lose this traditional means of maintaining a strong brand. The policy calibration in Malaysia At present, Malaysians still transact mostly via cash. While Malaysia endeavours to accelerate the migration to e-payments, we see that cash is necessary and will always be in demand. Although e-payments per capita nearly doubled in the past five years, the ratio of cash in circulation to GDP rose by 17%. We are therefore committed to ongoing enhancements in the way we manage cash and its circulation. To this end, we have invested in a new Automated Cash Centre, which most of you will be visiting as part of this Conference. We are also in the process of building a new modern Mint. 3/4  BIS central bankers' speeches  The next page for physical currency As we consider the future of physical currency, it is crucial that we bear in mind the sensitivities of the users of cash. We live in an increasingly aware and empowered generation. For this reason, issues of environmental footprint cannot be an afterthought. Similarly, banknote production must carefully consider the public interest and legitimate ethical concerns across society – including special interest groups. In addition, the industry must be run with manifest integrity. The Banknote Ethics Initiative is a welcome step forward in this regard.
But I will approach these questions with three words: ecosystem, resilience, and opportunity. Ecosystem Let me start with the ecosystem. By this, I mean the various components, mechanisms, and interactions within the financial system. But I also refer to the larger environment in which the financial system operates. These two domains are intricately connected with each other. Without a favourable operating environment an IFC cannot flourish. Hong Kong’s financial services are now broadly based and well established, reinforcing our status as a global centre on many fronts. We are also championing emerging trends that shape the future of finance – notably fintech and green finance. All of this results from the hard work of our financial practitioners, supported by world-class professional services in fields ranging from accounting to risk management and compliance. Hong Kong has a fully bilingual legal system, rooted in the common law, with an independent judiciary and a strong legal profession. Our financial regulatory regime is internationally recognised for its open and progressive approach. These are tried and tested elements of a rules-based system that offers a level playing field for market participants from all over the world. Our world-class universities continue to produce outstanding professionals who are highly competitive by any standard. Hong Kong is also a magnet for talented people from all corners of the world.

Quite apart from our excellent ecosystem and proven resilience, we have a strong record as the Mainland’s trusted partner in its entry into the global financial system. We have been able to assist in achieving the desired outcomes while ensuring the integrity and stability of the Mainland’s own financial system. Similarly, Hong Kong is a trusted partner for international investors. We offer them access to Mainland markets in the language and rules with which they are familiar. In doing so we help maximize their opportunities while minimising their compliance costs and risks. One exciting aspect of the Connect schemes is the prospect of unleashing the potential of Hong Kong as the world’s leading offshore renminbi business hub. The internationalization of the renminbi and the opening of China’s capital account are interdependent issues. Today’s seminar will focus on Hong Kong’s role in driving offshore RMB business, and the opportunities that come with it. I would simply like to stress the point that Hong Kong has the infrastructure, the expertise, and the markets to perform that role. Before I conclude, let me mention two other opportunities Hong Kong cannot afford to miss: green finance and technology. We intend to be at the forefront of these two trends that will define the future of finance. We are joining hands with local and international financial regulators to ensure that the financial sector plays its part in achieving global net-zero objectives. We are working with the banks to manage their own climate risk as they help the real sector go green.
Lars Heikensten: Stability and Growth Pact needs reinforcement Speech by Mr Lars Heikensten, Governor of the Sveriges Riksbank, at a conference organised by the European Commission, Brussels, 15 December 2004. *  *  *  Thank you, Mr Chairman. I very much appreciate this opportunity to comment on the work of the Commission. Perhaps the invitation is particularly pleasing for me as, unlike the other members on the panel, I do not come from a country that has introduced the euro. I should also immediately say that I very much enjoyed reading the background report and the communication on the Stability and Growth Pact produced by the Commission. Let me begin by characterizing the experiences from the Monetary Union so far. There is no doubt that the regulations on fiscal policy laid down in Maastricht had clearly positive effects up until the euro was launched. They are still having the same impact on those countries that remain outside the single currency and have the ambition of joining in the future. Far-reaching measures were taken, and are also being taken today, to enable entry into the Monetary Union. Noting the progress, some people have even claimed that earlier less well-functioning national economic-political cultures have been replaced by a more stability-oriented common European culture. But since the start of Monetary Union, this momentum has been lost. Several countries have returned to their old behaviour even though there are good examples of the contrary.

The subsequent market movements as investors withdrew funds from EME investments were an abrupt shock for EMEs generally, especially after the long earlier period of abundant liquidity and ample inflows. From one perspective, the unconventional nature of recent U.S. monetary policy adds little that is fundamentally new to the challenges now facing EMEs. These policies simply represent a way of easing, driven by our coming up against the zero lower bound. Central bankers have managed differences across countries in cyclical positions and policy stances many times in the past. But, from another perspective, we have less experience operating with unconventional monetary policy and this creates more potential uncertainties. This puts a premium on continued dialogue among central bankers, between central bankers and the market, and keen listening skills on our part. In my view, the fact that our large scale asset purchase programs affect the size of term risk premia globally is important. This set of monetary policies affects financial asset prices in a different way compared to changes in short-term interest rates, and we should be humble about what we claim about understanding the importance of this distinction. For the period ahead, it seems likely that markets will remain focused on vulnerabilities they might have ignored a year ago. The greater premium on strong fundamentals, policy coherence and predictability will likely remain. There will be no one right answer in managing the trade-offs that come with the changed environment, and adjustment will sometimes be difficult. Moreover, we will undoubtedly experience further bumps in the road.
Secondly, the European markets’ greater inflexibility makes it necessary to adopt a “preemptive” monetary policy strategy capable of stably anchoring inflation expectations. This is a direct consequence of the fact that, in the context of a high degree of inflexibility, the more inflation is allowed to grow, the more costly it then is, in terms of interest rate increases, to bring it back down to price stability. Indeed, the challenge that the central bank has had to face from the outset in the euro area has been precisely to boost monetary policy’s ability to 8 pre-empt inflation from gaining a foothold in the private sector expectations. The irony is that, the more monetary policy is able to act in a pre-emptive fashion and to anchor people’s inflation expectations, the more inflation stays under control and thus the less need there is to intervene aggressively on interest rates. If such a strategy is successful and the central bank is credible in its anti-inflation policy, statistics commonly used to assess monetary policy activism (such as the frequency and breadth of changes to the official interest rate) ironically show the opposite, namely that monetary policy is not very active or even that it is passive, whereas precisely the reverse is true. 5  For the euro area, see Dhyne, E. et al.

And third: I'd like to wish everyone a happy Valentine's Day. As Rihanna sang at the Super Bowl, I hope you all have someone to stand under your umbrella. Inflation Is Still Too High Economic developments over the past three years have been extraordinary. The pandemic contributed to dramatic swings in our economy - and economies around the world-that we are still grappling with today. At the onset, we experienced the deepest but also the shortest-recession in U.S. history, as well as an immediate spike in unemployment, the highest since the Great Depression. Then, along with Russia's war against Ukraine, the pandemic contributed to skyrocketing inflation, which reached 7 percent last June, as measured by the personal consumption expenditures (PCE) price index . That's a level we had not seen for four decades, and one that is well above the FOMC's longer-term goal of 2 percent. High inflation hurts everyone, but it's hardest on those who can least afford essentials like food, housing, and transportation. Persistently high inflation also undermines the ability of our economy to reach its full potential. The Federal Reserve has a dual  1/5  BIS - Central bankers' speeches  mandate, set by Congress, to promote price stability and maximum employment. And price stability is essential for the achievement of maximum employment on a sustained basis. Over the past year, the FOMC has taken strong actions to bring inflation down. Although we have seen some moderation in recent months, the inflation rate remains far too high at 5 percent.
The CPIX will be phased out of our reports and our communication in general. This will not have a tangible effect on the actual interest rate decisions in the future. However, we hope that this change will make the way we conduct our monetary policy clearer.

For instance, there is great uncertainty over what the consequences of the turmoil in the world financial markets might be for economic developments. In Sweden there are signs of a slowdown and GDP increased at a slightly slower rate than expected, according to statistics published by Statistics Sweden just over a week ago. At the same time, inflation is high and above the target. World market prices for some commodities, such as oil, have risen sharply over a period of time and this is a challenge for central banks around the world. New information of significance for inflation is constantly coming in. As the Riksbank has also pointed out on several occasions, inflation expectations have risen in recent months and they are above our target of 2 per cent. There may be several different reasons for this. The most important reason is probably that actual inflation has risen and this usually leads to expectations rising. The Riksbank monitors inflation expectations closely; the important thing is that they do not become entrenched at a high level, whatever the reasons behind them. To curb expectations we would have to act more forcefully. To summarise – our strategy has not changed and our target stands firm. We will continue to use a large number of alternative measures of inflation in our work, not least to illustrate the direct effects of our own interest rate policy. But the focus will be on our target variable, the CPI.