samchain/econo-pairs-v1 huggingface dataset:
All three of the interest rate measures taken over the last few months indicate the Eurosystem’s continued determination to counter the emerging upside risks to price stability in a timely and pre-emptive manner. It is our strong conviction that we can thereby maintain a non-inflationary environment, which is a prerequisite for making the economic upswing in the euro area sustainable. Currently, the prospects for strong economic growth in the euro area are very favourable. We are very much satisfied by the fact that economic activity is now expected to grow more strongly than anticipated earlier. In fact, most forecasts suggest that euro area real GDP growth will be above 3% in 2000 and 2001, reflecting both the favourable external environment and buoyant domestic demand. These expectations have just been underpinned by the first estimate by EUROSTAT of real GDP growth in the fourth quarter of 1999, which indicated that economic activity continued to expand at a robust pace at the end of last year. Surveys of consumer and industrial confidence conducted by the European Commission in early 2000 indicate that the positive development of economic activity should have continued in the first months of this year. Financial markets also expect a prolonged phase of economic expansion, as can be inferred from the fact that the yield curve has remained relatively steep. In this environment, employment is expected to increase further and the still very high level of unemployment should continue to fall.

To date, wage growth has been moderate and the same applies for actual wage settlements to date. It remains important that the expected improvements in economic conditions and labour market prospects are not jeopardised by inappropriate wage settlements. In fact, wage moderation would help both to contain inflation in the euro area and lead to further progress in employment creation. Wage negotiators can be assured that the primary objective of the Eurosystem is the maintenance of price stability in the medium term and that we are fully committed to this objective. The temporary increases in the 12-month rate of consumer price inflation which we are currently observing as a result of the oil price developments should not be reason for higher wage demands. There is now a broad consensus, also at the level of governments, that the currently favourable prospects for output growth in the euro area would be enhanced by a deepening of the structural reform process in the euro area. Governments of the euro area have already taken important initiatives, but the high level of unemployment in many countries shows that there is still much to be done. In this respect, fiscal policies can also make a substantial contribution to maintaining favourable economic conditions by using the current upswing as an excellent opportunity to proceed swiftly towards fulfilling the objectives of the Stability and Growth Pact. Governments should continue the process of fiscal consolidation which was observed in the run-up to Stage Three with ambition.
This cyclical component is the direct consequence of the financial and economic crisis itself, the appropriate monetary policy reaction to the crisis and the increased demand for safe assets which has fuelled capital flows into perceived safe havens such as Switzerland. In the second part, I will describe the risks that accompany such a prolonged period of low interest rates. In particular, I will argue that while a period of this kind does not pose a threat to price stability in the foreseeable future, it may be a breeding ground for financial instability. Finally, I will examine the implications of our analysis for interest rate perspectives. I will argue that, while the current weakness of the global economy still weighs on market and policy rates, the cyclical downturn will eventually reverse, and, over time, interest rates will gradually recover to more normal levels. Causes of low interest rates But first things first. Why are interest rates so low? When discussing the determinants of nominal long-term interest rates, it is useful to think of them as the sum of two elements, the real long-term interest rate and the inflation premium. Economic theory tells us that the real interest rate is the price that matches the supply of savings with the demand for capital used for investment.

In the analysis of potential future paths, we have to distinguish between policy rates and market rates. Market rates, in general, respond faster to changes in the economic situation and outlook than policy rates. The low inflation environment, subdued economic outlook and downside risks that prevail all warrant the continuation of a very accommodative monetary policy with low interest rates. Given the fragile state of the global economy, a premature increase in policy rates would carry the risk of choking off the recovery. In Switzerland, specifically, the subdued inflation outlook (chart 17), the highly valued currency and the fact that a recurrence of financial market tensions cannot be excluded warrant a continuation of the minimum exchange rate policy. In the current situation, the minimum exchange rate remains an essential instrument for preventing an undesirable tightening in monetary conditions should the upward pressure on the Swiss franc intensify again. Market rates are still determined by the current cyclical weakness of the global economy. Once the global economy gets back on a stronger and broader-based growth path and uncertainty wanes, rates should return to more normal levels. For Switzerland, this would mean that safe haven forces would become less relevant, removing some of the additional negative pressures on domestic interest rates. Conclusion In sum, given that we expect a slow, but continued improvement of the world economy, market rates are set to gradually recover to more normal levels over time.
In providing enhanced powers to the Central Bank to address financial stability issues and the strengthening of the oversight  2  BIS Review 113/2009  function of the Bank, correspondingly, focus has also been given to governance, internal controls and risk management by the Bank. For this purpose, the Central Bank of Malaysia Act 2009 empowers the Board to establish three specific committees, namely the Board Governance Committee, Board Audit Committee and Board Risk Committee that are chaired by a non-executive director, to ensure the independence of the oversight on the functioning of the Bank. A comprehensive financial system safety net Let me now turn to the second key area confronting central banks, namely the need to have in place an effective financial safety net. The global experience in these recent two decades has shown that crises have continued to plague the world and have resulted in massive costs to the economy. Financial safety nets serve two primary purposes, that is to avert risks to financial stability and to reduce the costs to the financial system and economy in the event of a crisis. They also serve an important social purpose of protecting savers and investors. The first component of the financial safety net is the existence of an effective regulatory and supervisory system to ensure the sound management of financial institutions and the ability to deal with problems affecting financial stability.

But the continued relative decline of manufacturing – and indeed the strength of sterling – over the past decade or so reflects, not the stance of monetary policy, but the remarkable wind of change that has blown across the world economy with the advent of China, India and much of the former Soviet Union into the world trading system. To their great credit, business people and politicians have not resisted changes to the structure of the British economy, unlike many of their counterparts abroad. As a result, total output and employment here have grown rapidly, and our living standards are higher than could have been sustained with policies aimed to defend the old industrial structure. Those changes, however, have led to the closure of many manufacturing companies. There are over a million fewer people employed in manufacturing now than a decade ago, and 200,000 fewer in the West Midlands. It is just over a hundred years since car production started at Longbridge, just over thirty years since it was nationalised, and no vehicle has been built there for over a year. But there are also many success stories. Since I became Governor, I have made regular monthly visits to the regions and countries of the United Kingdom, and visited around one hundred companies, large and small, new and old.
With the US rate hike cycle drawing nearer, the window for the region to get prepared for a tightening in financial conditions is getting smaller. It is therefore important for policy makers to contain further build-up of leverage, and to ensure banks will properly manage interest rate and exchange rate risks, and can withstand any potential deterioration in loan quality. It is encouraging to see that policymakers in many economies in the region have taken pre-emptive policy actions to lower credit growth and slow house price inflation. The biggest challenge now is when and how to relax these measures when market conditions reverse. 6. Second, policymakers will need to have sufficient backstop to mitigate systemic risk in the financial system in the event of a disorderly exit of US monetary policy. In this regard, the ASEAN+3 Chiang Mai Initiative Multilateralisation Arrangement, the regional financial safety net, could help to mitigate the risk of financial contagion by providing financial resources to members in the event of short-term liquidity difficulties. BIS central bankers’ speeches  1  7. Third, structural reforms remain the best way to reduce vulnerabilities and achieve sustainable growth over the long-term. We have been moving forward on this front through a deepening of intraregional trade, strengthening private and public-sector balance sheets and improving market infrastructure. But a lot more needs to be done. There is still ample scope to tackle structural impediments to growth and stability such as further capital market development, product and labour market reforms and service-sector reforms.

We should get well prepared or would lose the momentum quickly. 3. Exit by the U.S. Fed from its unconventional monetary policies is one of the most important external challenges that the region will face in the next year or two. A timely and orderly normalisation of monetary policy in the US should help to slow credit growth and contain asset price inflation in the region. However, a disorderly normalisation process could lead to significant outflows of capital, abrupt tightening of financial conditions and a severe re-pricing of assets. This can result in financial instability and even a sharp slowdown of economic growth in the region, particularly in those economies with weaker fundamentals and higher reliance on external financing. Yet, there is a lively debate about the size of the labour market slack in the US, which could complicate the judgment about inflation risks and the conduct of monetary policy. Indeed, the path of exit is not necessarily smooth, and interest rate volatility could be higher than currently anticipated. 4. While monetary policy normalisation may reflect a pick-up in the growth momentum in the US which should help support Asia’s exports, the strength of this support is subject to some uncertainty. We also need to be aware that economic integration has increased within the region. As identified by the IMF in the REO, the increase in trade and financial integration have strengthened the propagation of growth shocks between regional partners. 5. So, what are our major policy challenges?
I expect from financial institutions – both insurers and banks – an exemplary participation in this fight. I know that they fully agree to the principle, but they must now carry it through in their daily management; it is in your interest as compliance risk has become as vital, as strategic, as credit risk. May your institutions be strong on both fronts; may our country be as involved in the economic battle as in the fight against terrorism, with the contribution of all of us; and may each one of you remain vigilant and active, yet as serene as possible in 2016. Thank you for your attention. BIS central bankers’ speeches  3

Yields of shorter-term notes and bills have declined, with two-year government bond yields of Italy, Ireland and Portugal declining by over 400 bps since 8 December 2011. Longer-term government yields have declined as well, although not to the same extent as shorter-term yields (Slide 7). The positive secondary market developments were accompanied by favourable primary market activity with sustained demand in auctions of T-bills and shorter bonds in several euro area countries. All in all, there is now strong preliminary evidence that the three-year LTROs have helped the banks to reduce liquidity risk and therefore allowed them to smooth the deleveraging process over a longer period of time and maintain exposures to SMEs – at least in some cases. Anecdotal evidence also points to the return of some institutional money market investors, with quite a number of banks reporting that funds (also unsecured) are becoming available again at somewhat longer maturities. While banks seem to have used the funds obtained from the first three-year LTRO mainly for refinancing purposes, when looking forward to the next six months, they now seem to expect a stronger use of these funds for granting loans. Whether these expectations will materialise remains an open question and the Governing Council will closely monitor these developments. Challenges ahead A side effect of the three-year LTROs is that the banking system in the euro area is now in a situation of abundant excess liquidity.
Before discussing the lessons learned from the financial crisis and the changes that ensued, I think it is important to recount the Fed’s efforts to support the U.S. economy during this recent period of severe economic and financial distress. As you may recall, the Federal  4  Paul Warburg, The Federal Reserve System: Its Origins and Growth, vol. 1, 1930. 5  The Federal Reserve Banks are funded through their respective operations. The Federal Reserve Board – and later, the Board of Governors – is funded through semiannual assessments on the Banks [Section 10(3) of the Federal Reserve Act]. The Board’s financial independence was strengthened in the 1933 Banking Act [Section 6(b)] which stipulated that these semiannual assessments “[…] shall not be construed to be Government funds or appropriated moneys.”  6  For example, see Alesina and Summers, “Central Bank Independence and Macroeconomic Performance.” Journal of Money, Credit and Banking, vol. 25, no. 2 pg. 157–62, 1993. 7  H. Parker Willis described this independence given to the Reserve Banks in the conduct of policy. “There is nothing, either in the Federal Reserve Act or in the regulations of the Federal Reserve Board, to indicate that the reserve banks are to be operated in groups or through communications with one another, resulting in the establishment of a single policy as to detail.” H. Parker Willis, The Federal Reserve, pg. 128, 1915. 8  This assumes no vacancies on the seven-member Board of Governors.

I see this as necessary because there is a risk that the Federal Reserve could be changed in ways that might impair our ability to achieve our primary objectives – namely, full employment and price stability. As always, what I have to say today reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System. The current debate surrounding this nation’s central bank is not new, but rather dates back to our nation’s independence from Great Britain. The notion of a central bank in the United States has nearly always been controversial – in concept, design and practice. So much so that the charters of the first two U.S. central banks, the First and Second Banks of the United States, were allowed to lapse. The United States, in contrast to many of our European counterparts, had no central bank from 1836 to 1913. During this period, the economy was prone to financial panics. The rapid development of the 19th century American economy, including the westward expansion made possible by railroads, outstripped the ability of the private banking system to satisfy the nation’s needs for an elastic currency and a stable supply of credit. Ultimately, the Panic of 1907 – in which J.P. Morgan, the leading financier of the day, played an outsized role in responding to the crisis – was the catalyst that turned the tide back in favor of establishing a central bank.
What the country should do is to plan for the future, so that Sri Lanka could conveniently get itself integrated to the globalised services industry. As argued by Thomas L Friedman 9 , the world has become flat and the world nations, including USA, should recognize the flattening process of the world. If a country stubbornly and arrogantly refuses to accept this fact, it stands to lose, while others continue to move forward on an accelerated high gear. India, being one such country, has identified many areas which were previously non-tradable and took action to promote them actively. The advancements in ICT through a wired globe have enabled India to do so at a rapid pace. As indicated by Friedman, business process outsourcing (BPO) coupled with such personal services as secretarial services, provision of tuition, accounting and tax advisory services, on-line medical consultancy etc. are booming in the southern part of the Indian sub-continent, creating wealth and opening new opportunities to otherwise unemployed educated youth. Though India started its ICT much later than Sri Lanka, its export of software now amounts to US $ billion per annum. India’s present plan is to raise it US $ billion by 2010. This indicates the tremendous capacity which ICT alone would have for a country to create new wealth for its citizens. Ireland and Israel have exploited this opportunity profitably.

Real one-year interest rate in Sweden, the euro area, the United Kingdom and the United States Per cent 8  8  6  6  4  4  2  2  0  0  -2  -2  United States Euro area  -4  -4  Sweden United Kingdom  -6  -6 94  96  98  00  02  04  06  08  10  12  Sources: The IMF, the OECD and the Riksbank  Figure 2. Inflation in Sweden, the euro area, the United Kingdom and the United States Per cent 6  6  United States Sweden (CPI)  5  5  Sweden (CPIX/CPIF) United Kingdom  4  4  Euro area  3  3  2  2  1  1  0  0  -1  -1  -2  -2  -3  -3 94  96  98  00  02  04  06  08  10  12  Note. CPIX/CPIF for Sweden shows the CPIX to the end of March 2008 and thereafter the CPIF. For the United Kingdom, the RPIX is shown to the end of 2003 and thereafter the CPI. The HICP is shown for the euro area. The PCE deflator is shown for the United States. Sources: The Bureau of Labor Statistics, Eurostat, the Office for National Statistics, Statistics Sweden and the Riksbank. 12  BIS central bankers’ speeches  Figure 3.
Chart 6a: Shipping costs have fallen steeply in recent months May 2020 = 100  Freightos Baltic Container Index 1000  1000 Harpex Charter Rates Index  800  800  Baltic Exchange Dry Index  600  600  400  400  200  200  0 May 20  0  Sep 20  Jan 21  May 21  Sep 21  Jan 22  May 22  Sep 22  Source: Refinitiv, Baltic Exchange, Freightos Baltic Index (https://fbx.freightos.com), Harper Petersen and Bank calculations. Bank of England  Page 12  Chart 6b: Inflation in prices of cars and computers has also turned out to be transitory  35 30 25 20 15 10 5 0 -5 -10 -15 2017  2018  2019  Annual inflation; per cent 35 30 25 Second-hand cars 20 15 10 5 0 -5 Computers -10 -15 2020 2021 2022  ‘Computers’ refers to ONS code for ‘data processing equipment’. Source: ONS and Bank calculations. However, there was always the risk that big rises in traded goods prices might prompt faster inflation in its more persistent, domestic components, including nominal wages. This would have a bigger impact on forecasts of inflation at policy-relevant horizons and clearly merit a response. In gauging the potential strength of these “second-round effects”, how much did we have to go on? Not much, is the answer. As we saw earlier, import (and therefore consumer) prices have risen much faster than those of output.

Yet there was almost no perceptible response of nominal pay and domestic prices. Economists attributed this decline either to the change in monetary regime itself, or – more often – to greater flexibility in the labour market. Chart 7: Lower sensitivity of wages to real income shocks during inflation targeting period  Rolling coefficient on wedge between consumer and output prices using 18-year regressions. Dotted line shows coefficient estimated by Layard, Nickell and Jackman (LNJ) on 1956-85 sample. Source: Layard, Nickell and Jackman (1991), ONS and Bank calculations. But it was hard to be confident about these estimates. Labour-market flexibility isn’t set in stone. In a speech in 20066, Charlie Bean suggested that increased ease of migration, in both directions, might have reduced the sensitivity of real wages to shifts in labour demand. It’s possible that, by adding a degree of friction to  5 Layard, Nickell & Jackman (1991), ‘Unemployment: Macroeconomic Performance and the Labour Market’. 6 Bean (2006), ‘Globalisation and Inflation’. Bank of England  Page 14  the inflow and outflow of migrant workers, the combination of Brexit and the pandemic have made the labour market less adaptable than it was a few years ago. There may be other reasons why susceptibility to second-round effects can vary. During the one period in which higher import prices seriously impinged on real incomes, following the financial crisis, unemployment was also much higher than it is today.