samchain/econo-pairs-v1 huggingface dataset:
This proved not to be the case and these days we present the entire cohesive forecast for the inflation target, wages, GDP and its components, the repo rate and so on. I believe that by doing this we have increased the public’s understanding of monetary policy and reduced the drama surrounding the entire monetary policy process. Assessing economic activity entails reviewing material that is in a constant state of flux, and when we change our monetary policy these changes can be concretely related to changes in real-economic conditions. I would also like to add that the quantified forecasts are of course interesting, but the associated analyses of the driving forces behind different courses of development are at least as interesting. How do we make our forecasts? Developments abroad play an important role For a small open economy like the Swedish economy, the international outlook is the point of departure for the forecast. We cannot influence events abroad, but what happens there has a major impact on developments here at home. Here I would like to highlight some of the special aspects relating to the forecast of developments abroad. 1  Apart from the fact that it is considered desirable to stabilise resource utilisation, resource utilisation is also an important inflation indicator. Resource utilisation is thus an important factor that plays several roles in the monetary policy analysis and there is an almost constant discussion of what measures of resource utilisation are the most relevant.

It is the system that provides payment services, converts savings into financial resources for investment and consumption, and contributes facilities for managing risk. In other words, the financial system performs a number of important social functions. If any of these functions were to be disrupted, the social costs could be very high. The damage inflicted by a disruption would probably be particularly great if it involved a vital component of the payment system. This is readily understood when one considers the enormous flow of payments. In Sweden, for instance, the payment system has a daily turnover of around SEK 500 billion, which means that the equivalent of our annual gross domestic product has to be handled in less than a week. Studies show, moreover, that in the past fifteen years there have been more than a dozen crises which cost the countries concerned at least 10 per cent of their GDP. So there are good reasons for state supervision of the financial system. The Riksbank has a function here in that the Riksdag (Sweden’s parliament) has made us accountable for promoting a safe and efficient payment system. A major ground for making us responsible for efficiency and stability is that, along with the banks, the Riksbank is a central player in the payment system and provides means of payments. The banks distribute notes and coins, keep transaction accounts linked to giro systems and operate credit card systems. The Riksbank in turn provides accounts in the payment system, RIX, that is available for large-value interbank payments.
But many ups and downs and a lot of work remain before we can declare this crisis officially over. And it is in the light of this that we must formulate our monetary policy. The financial crisis has affected the conditions for our actions – how we need to work to manage our two main tasks. As long as the conditions require it, we will also take whatever measures necessary to safeguard financial stability. When necessary we will also act with greater flexibility, speed and force than usual regarding our monetary policy. The latter also affected our most recent interest rate decision and I will now go on to talk about this in more detail. The most recent interest rate decision As I have already mentioned, economic activity has weakened unusually quickly. In addition, there is considerable uncertainty regarding economic developments. To dampen the fall in production and employment, and to manage the inflation target of 2 per cent, our assessment was that it was necessary to adjust the interest rate forecast downwards and to quickly cut the interest rate at the same time. We therefore decided just over two weeks ago to cut the repo rate from 2 per cent to 1 per cent. We are also assuming that the interest rate will remain at around the same level over the coming year, with some probability of a further cut being necessary. But the prospects are brighter further ahead.

The broken line represents the Riksbank’s forecast  12  Source: The Riksbank  Real repo rate… 4  4  Real repo rate February December  3  3  2  2  1  1  0  0  -1  -1  -2  -2  -3  -3 04  05  06  07  08  09  10  11  12  Source: The Riksbank  BIS Review 23/2009  13  Downward revision in Consensus forecasts for GDP growth 2009 Annual percentage change 7  7  6  6  5  5  4  4  3  3  2  2  1  1  0  0  -1 -2  Japan USA Eastern Europe  -3 08-Jan  08-M ar  -1  Euro area Asia Latin America  -2 -3  08-M ay  08-Jul  08-Sep  08-Nov  09-Jan  Source: Consensus  Sharp fall in orders and exports Annual percentage change, seasonally-adjusted data 35  35 Orders received, export market Exports  30  30  25  25  20  20  15  15  10  10  5  5  0  0  -5  -5  -10  -10  -15  -15  -20  -20 80  82  84  86  88  90  92  94  96  98  00  02  04  06  08  Note.
All in all, we have come to the assessment that the risk spectrum is neutral; we see equally large risks for a lower inflation path than in our main scenario as for a higher path. Repo rate lowered 0.25 percentage points The Riksbank's total assessment is that inflation measured at the rate that has guided policy in recent times, UND1X, will be slightly lower than the target level one to two years ahead. However, the picture is more complicated than this. Despite the fact that this indicates the repo rate should be lowered, the decision has not been a simple one. This is because one important reason for inflation being lower than the target level one to two years ahead is that electricity and oil prices are expected to fall back from their current high levels and it is not certain this fall in prices will affect policy. When adjusted for energy prices, inflation is expected to be in line with the target two years ahead. The forecasts of inflation presented in the Inflation Report provide scope for lowering the repo rate by 0.25 percentage points. This was also the decision taken by the Executive Board of the Riksbank yesterday. An important circumstance that affected the decision is that the unease and uncertainty in the global economy risk leading in the short term to a much worse development in economic activity than described in the main scenario.

What the central banks of the world can do in this situation is to continue to pursue their policy consistently to avoid contributing to greater uncertainty and increasing pessimism. If participants in the financial markets of a few years ago could be said to show a strong willingness to take risks and perhaps a sometimes exaggerated optimism, there are today tendencies in the opposite direction, particularly if one looks at the headlines in the media or listens to market participants. The central banks can balance this by maintaining credibility in price stability and by safeguarding the functioning of the payment system. The Riksbank strives to conduct a clear, credible monetary policy that is generally accepted by both the Swedish people and participants in the financial markets. We have therefore specified an explicit target for the annual inflation rate and explained that we normally try to keep to a simple rule-of-thumb; if the forecasts of inflation one to two years ahead exceed the inflation target we raise the interest rate and vice versa if the forecasts show inflation below target level. This clear intellectual framework makes it easier to influence expectations in society of monetary policy and to evaluate the policy afterwards. Both we ourselves and external analysts can take a stand on whether the policy appears sensible, whether the forecasts we make are reasonable, and whether we follow the principles we have declared that we follow.
As I said, the performance of the economy in the third quarter was similar to that of previous quarters, so it continued to grow between 2 and 2.5 percent annually. This result revealed a deeper than expected decline of natural resources, particularly mining, due to production downtime associated to the fall in the copper price. The performance of the other sectors was somewhat better, namely construction and some services. As for domestic demand, it is still growing weakly, although a little more than we foresaw in September. The increase in gross fixed capital formation, where specific factors combine, such as high imports of transport equipment, and stronger residential housing construction, is worth noting. Private consumption kept a growth rate of around 2 percent annually (figure 3). The performance of domestic demand reflects that business and consumer confidence indicators remain pessimistic, despite the resilience of the labor market and that GDP growth, while slow, has stabilized. The cost of domestic funding is still low by historical standards, partly reflecting the expansionary stance of monetary policy. Nonetheless, with the sole exception of mortgage loans, credit growth in real annual terms is still limited (figure 4). The baseline scenario assumes that GDP will grow between 2 and 3 percent in 2016, a lower range than forecast in September. This projection continues to estimate that the economy’s potential growth (i.e., the non-accelerating-inflation growth rate) lies around 3 percent. Accordingly, we believe that output gaps will exhibit limited growth in 2016 and will begin narrowing towards 2017.

However, both our baseline scenario and the market’s projections expect it to rise again above 4 percent and to stay in the neighborhood for the larger part of 2016. Our currency’s depreciation has been a significant factor behind the increase in inflation, reflected mainly in the CPIEFE inflation for goods which, after averaging –1.9 percent in 2013, has been somewhat below 5 percent since July this year. Add to this the indirect effect on other prices via indexation to past inflation. Aside from the sustained depreciation of the peso, the persistence of high inflation is also related, as was stressed in September, with the fact that output gaps, despite some increase, are of a smaller magnitude than they have been in other low-growth cycles, making it difficult for non-tradable goods inflation to make a bigger adjustment (figure 1). The evolution of output gaps is most evident in the labor market, where the unemployment rate remains low and annual growth of total employment hovers around 2 percent, with salaried employment showing faster growth at the margin. While nominal wages have had a gradual moderation since late 2014, they are expanding at about 6 percent annually (figure 2). Meanwhile, fuel prices have dropped and foodstuffs inflation has slowed. The recent adjustment of public sector wages should help to contain wage pressures. Our baseline scenario estimates that GDP will grow by 2.1 percent in 2015, within the range we foresaw in September.
Considerable efforts have also been placed in regional financial market development, especially for a deeper and more liquid secondary bond market. On the supply side, the Asian Bond Market Initiatives (ABMI) seeks to develop deeper and more liquid capital markets that facilitate the channelling of the large pool of savings in the region to fund productive investments, thereby enabling further regional economic development. Recently, the establishment of a Credit Guarantee and Investment Mechanism by ASEAN+3 to support the issuance of local currency-denominated corporate bonds, with an initial capital of USD500 million, was announced. Meanwhile, the Asian Bond Fund (ABF) Initiative focuses on addressing demand-side issues by broadening and deepening domestic and regional  BIS Review 130/2009  7  bond markets through pooling reserves for investments into regional bond markets. Two funds, totalling USD3 billion, have been established to catalyse market development. Regional financial integration has accelerated in this decade. A more diversified financial system, together with strengthened financial infrastructure and capital account liberalisation, have seen the share of intra-regional portfolio investment, in both debt and equity, as a share of total portfolio investment has increased to 24% in 2007 from 15% in 2001. Mergers and acquisitions (M&A) have also been growing, with intra-regional M&A as a share of total M&A in the region rising to 47% in 2006 from 32% in 2004. Most of the investments were into the services sector, such as financial services and real estate.

The last time this was done was back in 2003. There are expectations that the new ECB leadership will initiate such a review. What effect do the low interest rates have on the Bulgarian economy? The immediate effect is positive. The increased credit activity is one of the indicators for this. Such a development, however, is connected with some serious challenges, for Instance the profitability of the banks as a result of the diminishing interest margins. I should say that so far the Bulgarian banks manage to deal with this challenge. Cyclical risks are also accumulating, due to which BNB activated and subsequently increased the level of the countercyclical capital buffer for banks. In recent years we have seen a few large deals in the Bulgarian banking system. Do you expect the consolidation to continue in the future? Is it a completely positive phenomenon? Consolidation is one of the possible responses to the challenges facing the banks. I expect this process to continue. 3/3  BIS central bankers' speeches
Chart 6 plots the Felstein-Horioka correlation coefficient alongside an index of financial liberalisation from Obstfeld and Taylor (2004). Between 1930 and 1980, the Feldstein-Horioka coefficient was close to one – a puzzlingly high co-movement between saving and investment. But that pattern has shifted significantly over the past 30 years. Saving and investment correlations are no longer puzzlingly strong. Indeed, just ahead of crisis, saving/investment correlations had fallen to around zero. They are presently at their lowest levels in almost a century. On the face of it, this might point toward a rather benign interpretation of rising global imbalances: they may simply be the mirror image of rising capital liberalisation. This would be a good cholesterol story. Even then, however, there may be risks associated with intermediating large global flows of funds. Gross flows can matter. As experience during 2008 illustrated (Chart 4), sharp reversals of these gross flows can disrupt the functioning of financial systems, in particular banking systems reliant on overseas funding. Large inflows may also cause indigestion problems for small domestic capital markets. The strong upward pressures on asset prices in a number of emerging market economies over the past few months are testament to that. As Chart 5 also shows, most of the rise in global flows over the past decade is accounted for by changes in the saving rates of deficit and surplus countries, rather than in their investment rates. In other words, differential savings behaviour has been the prime mover behind rising global imbalances.

Today, it contributes around a tenth. China has been the mirror image. Having contributed less than 5% in 1980, today China is the single largest source of global saving, contributing around one fifth. It has been argued by some that these trends could simply reflect different cultural attitudes towards saving among US and Chinese citizens. In the US, it is often said that there is a culture of spending rather than saving – neurologically, the impatience gene may be dominant (Haldane (2010)). In China, by contrast, the culture may be biased towards saving rather than spending, with the patience gene dominant. In other words, differences in agents’ rate of time preference, or degree of patience, might account for savings imbalances (Buiter (1981)). 4  BIS Review 174/2010  But a recent survey of time preferences in 45 countries suggests cultural differences are not the full story (Wang, Rieger and Hens (2010)). Asked to choose between a payoff this month and a larger payoff next month, 68% of US students choose to wait; they exhibit patience. Facing the same trade-off, 62% of Chinese students made the same choice. These differences are small. 3 They are also the “wrong way around” to explain imbalances. So if cultural factors are not the explanation, what is? Charts 8 and 9 plot national saving rates in China and the US, broken down on a sectoral basis. There are striking differences in saving behaviour across the government, household and corporate sectors in the two countries.
Recent experience around the world suggests that the potential of a financial centre cannot be maximized unless it possesses another essential attribute. That other ingredient is stability and it is this aspect that I propose to explore today. Ensuring financial stability is a statutory responsibility of the Central Bank of Malta. The Bank is thus obliged to participate actively in the maintenance of a stable and efficient financial system and to contribute towards its development. This applies not only to the payment and settlement system, of which the Bank is the regulator, but to the entire financial system. The Bank has an on-going role to play in assessing the robustness of the system. It must draw attention to any problems and ensure that these do not in any way impede the functioning of the financial markets as efficient providers of capital for companies and households. The Bank’s approach is therefore to consider the general risks to the system rather than the situation of individual credit and financial institutions. The latter is the task of the Malta Financial Services Authority (MFSA), which has successfully assumed, over the last ten years, full responsibility for the supervision of institutions providing financial services. Why central banks promote financial stability There are several reasons why the maintenance of a healthy financial sector is an essential function of central banks, and this irrespective of their involvement or otherwise in regulation and supervision.

The overall experience has been positive and encouraging. That said, the sandbox is a learning process both for the authorities and the participating firms, and we are constantly working on possible ways to improve its functioning and usefulness for both the authorities and the private sector. In summary, central banks and other authorities have a range of tools and roles to play when facing the challenges posed by the increased digitalisation of the financial sector. I have tried to provide some European experiences from the regulatory angle (MiCA), but also from the perspective of the provision of services (the digital euro project) and from the more informal interaction that innovation hubs and sandboxes allow, with the Spanish sandbox as an example. Carefully choosing and calibrating the right tools is key to making the most of the opportunities that digitalisation offers, while mitigating its risks. Let me stop here, and thank you very much for your attention. 1 43% of respondents ranked privacy as the most important aspect of the digital euro  (well ahead of other features) in order to maintain trust in payments in the digital age. 2 For further details on these decisions and next steps, see "Progress on the  investigation phase of a digital euro", available at https://www.ecb.europa.eu/paym /digital_euro/investigation/governance/shared/files/ecb.degov220929.en.pdf. 3 Caixabank, for peer to peer online payments; Worldline, for peer-to-peer offline  payments; EPI, for point of sale payments initiated by the payer; Nexi, for point of sale payments initiated by the payee; and Amazon, for e-commerce payments.
Last year, due to a confidence crisis and doubts on the Brazilian public debt and the Brazilian economy the exchange rate depreciated strongly and, as a result, we have observed an increase in the current inflation rate and a contamination of future inflation expectations. The conduct of monetary policy will have as strategic priority the avoidance of this transitory hike in inflation being perceived as permanent. We will fight, unrelentlessly, against the expectation of an increase in the level of inflation and the indexation of the economy. The goal is to bring inflation back to the trajectory defined in the targets already set by the National Monetary Council (CMN). The Central Bank will pursue a path of convergence to the already defined inflation targets, taking into account that this convergence will not occur instantaneously. It is a common practice among Central Banks in the world to dilute the convergence of inflation to the targets over a period longer than a year. This is particularly important when an inflationary bubble arises due to a supply shock, as has been the case in Brazil. Therefore, we will proceed by aiming at an inflation rate that takes into account the inertia inherited from inflation in 2002, and the supply shocks stemming from the increase in administered and monitored prices in 2003. Therefore, monetary policy will maintain the goal of ensuring that inflation will return to its target path within a time period that does not result in unnecessary costs to the economy. Transparency in the process is essential.

This analysis contains an important misperception. Stability is not an end to itself. It is a necessary condition for growth and social justice. An environment of stable prices establishes a necessary condition for output growth by reducing uncertainties and distortions, lengthening decision-making horizons and allowing for an increase in investments and productivity gains. There is no dichotomy between price stability and economic growth, as stability paves the road for growth. Price stability allows the country to plan government actions. Moreover, it should be made clear that there is no such thing as a choice of higher sustainable growth with higher inflation. No country in the world has experienced prolonged periods of economic growth with high rates of inflation. Nonetheless, examples abound of short periods of growth driven by mistaken policies, usually inflationary, which were followed by recession and stagnation that lasted for much longer periods. The Central Bank's goal is, therefore, to contribute to economic growth by maintaining price stability. In the long run, higher productivity is the element that underpins economic growth. To achieve higher productivity growth, it is essential to increase the public sector's savings rate, thereby allowing society to invest in production as opposed to primarily financing the public sector. Aside from its effect on output growth, a permanent reduction in inflation inherently and unmistakably brings about a reduction in poverty, with the consequent social inclusion, in addition to sowing the seeds for reducing inequality.