samchain/econo-pairs-v1 huggingface dataset:
Crucially, this threatens to create more persistent inflation dynamics in the UK, which continue even after the original impetus from external sources has dissipated or even reversed. It is via such second-round effects that higher current inflation can become embedded in the inflation process and achieve a self-sustaining momentum all of its own. Such behaviour would threaten a more sustained deviation of inflation from target, going beyond the realisation of the shorter-term volatility that I have already mentioned. Monetary policy implications (2) To emphasise: because the inflationary implications of second-round effects are more persistent, they are more relevant to the pursuit of the inflation target over the medium term. For the same reasons, they are more amenable to influence by monetary policy actions that operate through ‘long and variable lags’. By nature, persistent inflation dynamics will continue until the lags in monetary policy transmission unwind. And the difficulty of timing monetary policy actions precisely given uncertainties about how and when those lags unwind is less onerous when addressing more persistent – and thus lower frequency – developments in inflation. These are the reasons why the MPC has tended to place more weight on the evolution of  Page 8  domestic price and wage setting in assessing the UK inflation: not because it is a domestic component (even though it is), but because it is a persistent component, which matters more in sustainably achieving the inflation target.

Or (as in the MPC’s May 2022 monetary policy summary) entertain dissenting views not just on votes on Bank Rate but also on the communication reflected in the summary. 16. For a discussion of these risks and their potential consequences in a previous interest rate cycle, see Pill (2019). Page 13 17. See Bank Rate increased to 1.25%, Bank of England, 16 June 2022. 18. The views expressed in this speech are not necessarily those of the Bank of England or the Monetary Policy Committee. I would particularly like to thank Saba Alam and Nick Bate for their help in preparing the speech. I have also received helpful comments from Andrew Bailey, Tom Belsham, Ben Broadbent, Fabrizio Cadamagnani, Alan Castle, Andrew Hauser, Neil Kisserli, Catherine L Mann, Nick McLaren, Dave Ramsden, Michael Saunders, Fergal Shortall and Silvana Tenreyro, for which I am most grateful. The responsibility for all remaining errors is my own. Returning inflation to target - slides
Put simply, the more people who use or accept an instrument of payment, the greater benefit each consumer or merchant has from using or accepting it. Few people would want to have a card if there were not sufficient traders who accepted card payments. Traders on their part would not want to accept card payments if there were not enough consumers willing to pay with cards. In other words, a critical mass of users is needed for a payment instrument to be generally accepted and successful. When fewer and fewer people are using a payment instrument, one gradually reaches a point where it is no longer profitable to continue using the instrument. Then it will disappear from the market, which was the case with cheques in Sweden in the 1990s. Given that the use of cash is declining rapidly, there is reason to wonder whether we are now reaching the same point with regard to cash. Ac-  1 On 31 October 2017 there was SEK 45.2 billion in valid banknotes in circulation, with the 1,000-krona banknote accounting of SEK3.5 billion of this. The value of the valid coins was SEK 2.7 billion, including commemorative coins (SEK 34 million). 2 [6]  cording to current research, half of Swedish traders believe they will stop accepting cash by 2025. In other words, for Sweden the cashless society is no longer just a hypothetical situation in the distant future.

This infrastructure is often housed with the supplier of the payment service or with some other intermediary. After these checks, the actual payment is implemented, that is, the money is moved from the payer to the recipient. This is called clearing and settlement and it requires a further infrastructure. The systems that manage the entire process are characterised by both network effects and economies of scale. Both aspects mean that the payment infrastructure must of necessity be very concentrated and standardised. Although this is necessary, it entails a number of other problems. One such problem is greater vulnerability in society as a result of what is usually called the “single point of failure”. If the infrastructure is affected by serious shocks, there are no alternatives available, especially if cash has been phased out. Let us assume that the card system stops functioning for some reason, at the  5 [6]  same time as cash payments are no longer possible in practice. This situation would cause serious disruptions to society. A further aspect to take into account is that when the infrastructure is concentrated to the hands of a few, it is easy that problems arise with regard to lack of competition and entry barriers for new agents. Ultimately, this can in turn entail efficiency losses for society as a whole and low incentives for innovation. A potential e-krona could alleviate both of these problems. An e-krona could be based on a separate infrastructure that could be used if the alternative systems fail.
This is explained by the fact that we are supplying liquidity on an unlimited basis and that we have allowed collateral in a way which is more forthcoming. And this is true for all central banks. But for us, our weekly balance sheet in comparison with that of one year ago has increased by around 55 % [from around 1.3 trillion to 2 trillion euro]. Of course, this increase does not imply an increase in net liquidity, because a significant part of the liquidity we provide comes back in the central bank through the deposit facility. FT: That’s less than the Fed. Trichet: Yes, true. For the ECB part of it comes also from the fact that we have the counterparts of the dollar that we are supplying ourselves, and a counterpart of the dollar is our own collateral. The central banks are in a situation where they are playing a much more quantitative role than they used to play, and it is true for all of us. FT: Should there be more centralised supervision within the Eurozone, and should the ECB take responsibility? Is the ECB willing to take that responsibility if the politicians so desire? 6  BIS Review 159/2008  Trichet: As you know, we have always been in favour of a very close relationship between the central bank and the banking surveillance authorities. We said that long, long before any new problems, any new difficulties. We had a Governing Council position close to the start of the ECB, which we made public.

 My point is that the analysis would benefit from having a broader perspective. We should look beyond the household stretch to household strain, which encompasses more structural factors.  I would refer to two dimensions of the household strain: quality of living and inequality of income, savings, and access to credit.  1. Quality of living: - overcrowding – CEE countries have the highest concentration of dependent children, and the lowest number of rooms per person (Figure 4 and 5); - poor living conditions – CEE countries have the largest share of population living in poor conditions (Figure 6); - high risk of poverty or social exclusion (Figure 7) – despite having high ownership rates, CEE countries have high shares of people at risk of poverty or social exclusion (slightly declining after EU integration); 2  - To partially compensate for the low quality of living, and given the social pressure of a high ownership rate, property taxes are relatively low in CEE countries (Figure 8); - Low quality of living creates pressure for new housing, despite financial difficulties to service new loans. It also creates pressure for migration, with longterm implications for financial stability.  2. Inequality: - Income inequality: Romania, Bulgaria and Czech Republic have the highest Gini coefficient in the EU (Figure 9); -  Housing cost overburden: If we adjust for rent-related costs (as CEE countries  have high ownership), many CEE countries are on top.
In this scenario, commodity prices are envisaged to go below the assumptions presented in the baseline scenario; credit conditions are projected to remain tight for a while and recovery in foreign demand would be a prolonged and slower process due to the late recovery in the global economy. Meanwhile, crude oil prices are projected to drop to USD 45 per barrel and remain at this level throughout the forecast horizon. This projection is above the one presented in the January Inflation Report, as OPEC announced that it would not allow sharp falls in oil prices. Meanwhile, it is foreseen that food prices inflation would remain below the baseline scenario and therefore will become 5.5 percent by the end of 2009 and 5 percent afterwards. Against this background, assuming that measured policy rate cuts continue throughout 2009, it is projected that with 70 percent probability, inflation will be between 3.9 and 6.5 percent with a mid-point of 5.2 percent at the end of 2009, and between 2.7 and 6.3 percent with a mid-point of 4.5 percent at the end of 2010. Furthermore, inflation is expected to go down to 4.2 percent by the end of 2011. To sum up, these forecasts indicate that in the case of a longer-than-expected slowdown in global economic activity, inflation would remain below the medium-term forecasts even if the measured policy rate cuts continue throughout 2009 (Graph 28).

And adaptation to structural change to the economy will mean putting capital into new businesses to replace those whose business models are no longer viable. Failure of risk transfer markets in things like directors’ and officers’ indemnity and – yes – business interruption would have a cooling effect on this necessary investment. So if a protection gap were to emerge through the reactions of insurers and insured to what they have learned about contract uncertainty, we should worry about the wider impact that that might have on economic recovery. I do see a risk of a protection gap. The pandemic has highlighted risks around unintended exposures in insurance contracts and unexpected links across risk areas under extreme circumstances. Most acutely on business interruption insurance – where we have seen vastly different interpretations of how policies should respond to the restrictions placed on businesses as a result of Covid-19, and the sums involved have perhaps militated against either insurer or insured settling for a compromise outcome to claims. The high profile of disputes over business interruption claims has done nothing to dent the popular caricature of an industry that is happier to accept premiums than to pay claims. This matters: it could have an impact on demand for policies, if businesses perceive them not in practice to offer the cover they need – not just in business interruption, but in indemnity policies that cover non-specific perils.
Another way of thinking about it is that, at an aggregate level, our purchases reduce the scale of assets that the private sector needs to finance by borrowing from the banks. This is not just a UK thing. That being so, we should not be too surprised that there has been a sharp fall in the utilisation of central banks’ liquidity facilities during 2009. The size of central bank balance sheets (Chart 12) remains much the same as about a year ago, just as QE was getting underway; but the composition of our asset portfolios has changed. The bottom line is that we are still providing an enormous amount of liquidity to the banking system as a whole, but with revived wholesale money markets distributing that assistance to where it is needed. So our monetary instruments and financial stability instruments shade into one another – unsurprisingly. And that means that when planning our so-called exit strategies from monetary easing, central bankers will need to weigh the effects on bank funding conditions, which in turn affect credit conditions and demand in the economy. Five issues for the policy framework for maintaining macro economic stability I want to look beyond the immediate conjuncture. I don’t plan to say anything today about financial sector reform, but will concentrate on the overall framework for preserving macroeconomic stability. That there are lessons from the crisis is obvious. Don’t be seduced by the appearance of stability The so-called Great Stability was, with hindsight, in some respects a surface phenomenon.

This country suffered too much from the inflationary booms and busts of the past for us to take risks on that score – in either direction. QE: the stimulus to nominal demand, and the financing of the banking system To avoid the downside risks, we need to help to revive the economy. And the monetary stimulus is, of course, directed at a big deficiency of nominal demand in the economy. At our latest monthly meeting in early February, the MPC maintained Bank Rate at 0.5% and the stock of money injected via asset purchases at £ The money market yield curve has edged down slightly since then. Over the past year my colleagues on the MPC have variously set out the key mechanisms through which Quantitative Easing (QE) should work. I shall not go over all that ground today, but there is unavoidable uncertainty about the speed and potency of QE’s effects. I am minded to think that some of the effects will come through fairly gradually. And therefore I would stress that the monetary stimulus from QE has not stopped. The flow effect of our bond purchases on gilt yields is not the beginning and end of how QE provides monetary  4  BIS Review 21/2010  stimulus. Plainly the mechanisms through which our money injections affect the economy differ in some respects from the transmission of changes in Bank Rate, which in an economy with a lot of (net) floating-rate debt can affect household and business borrowers’ cash flows quickly.
Production line could be disrupted by flooding as we witnessed in 2011, natural disasters could affect logistics, and our popular beaches become more vulnerable to the rising sea level and changing weather patterns. Impact on agricultural sector Most concerning, perhaps, is the effect on the agricultural sector which is the source of employment for more than a third of our population. New types of plant and animal diseases could thrive in the warmer climate. Soil loss and land degradation through floods and land mismanagement could decrease crop yield. With only a fifth of our agricultural land having access to irrigation, severe draughts and floods pose serious risks to the Thai society. With most of the workforce earning low income, impacts on the agricultural sector is likely to affect those who are most vulnerable in the society. While being net exporters of agricultural products provide us some sense of food security, the agricultural sector—one of the least productive sectors in the economy—needs a complete overhaul to stay competitive amidst these challenges ahead. Adoption of agricultural technologies including data collection, precision farming, and resource-sharing platforms; development of plant and animal varieties 4  that are resilient to climate change and diseases; along with usage of closedenvironment production techniques would help raise productivity and resilience of the sector that many of us consider the backbone of our economy. Sustainable businesses The agricultural sector is not the only sector that needs to change.

In fact findings show that the implications of this in the long term for the ability of households and businesses to get a loan are relatively modest – although there is considerable uncertainty around this result. As such, while other risks may arise during a transitionary phase, the most significant risk arises from the potential for stablecoins in particular to undermine confidence in money and payments, and hence in the wider financial system. As we discussed a few minutes ago, the risk of a loss of confidence in the credibility and stability of private money is not theoretical. Loss of confidence in private money can be a major threat to financial stability. But it is equally true that private money can be made acceptable as a widespread means of payment – indeed, as I covered earlier, the vast majority of money held for transactions in the United Kingdom is already private. So, with the right regulation, a stablecoin could potentially be made safe for wide-scale use. Our existing regulatory framework seeks to ensure that the public is able to trust the reliability and stability of the money it uses every day. Banks are subject to extensive rules and requirements to ensure that consumers can use privately-issued money with confidence and interchangeably with cash. These core rules and requirements were developed over time – in many cases via trial and error, with new rules introduced following financial crises.
It will take a team effort to get there – from health authorities, from fiscal authorities and from all of you here. But I can assure you that the ECB will continue to play its part, as we have done since the first days of the crisis.  2. “An attitude and a conviction”. See Erhard, L. (1956), 1. European Commission (2019),  SME Performance Review. “Mittelstandspolitik”, in Rüstow, A. (ed. ), Der mittelständische Unternehmer in der Sozialen Marktwirtschaft: Wortlaut der Vorträge auf der vierten Arbeitstagung der Aktionsgemeinschaft Soziale Marktwirtschaft e.V am 17. November 1955 in Bad Godesberg, Ludwigsburg, pp. 51-61. 3. Simon, H. (2012), Hidden Champions – Aufbruch nach Globalia: Die Erfolgsstrategien unbekannter Weltmarktführer, Campus Verlag, Frankfurt/New York. 4.   McKinsey (2020), “  How COVID-19 has pushed companies over the  technology tipping point—and transformed business forever”, 5 October. 5.  ”, NBER Working Papers, No 27137, National  Barrero, J.M., Bloom, N. and Davis, S.J. (2020), “  COVID-19 Is Also  a Reallocation Shock  Bureau of Economic Research, May. , 15 July.  7. SME United (2020),  , 30 June. 8. IMF (2021), “ ”, 19 January.  9. 2009-2018 average. This definition of external finance includes bank 6. OECD (2020),  Coronavirus (COVID-19): SME policy responses  The economic impact of COVID-19 on SMEs in  Europe  Germany: 2020 Article IV Staff Report  loans, debt securities, trade credit and other liabilities and excludes intercompany loans and equity. 10. Aggregate figure for all maturities. 6/8  11.

This encourages banks to grant loans to SMEs and refinance them by borrowing from the ECB. In parallel, our supervisory arm ensured that there were no prudential barriers to banks acting quickly, which freed up € billion in bank capital for new lending. And fiscal authorities complemented our efforts, making available wide-ranging loan guarantees and other liquidity support measures – equalling close to 20% of euro area GDP. This was crucial to mitigate the higher credit risk banks face when lending to SMEs during a recession. As a result, from March to May last year, bank lending to euro area firms rose by the largest amount on record. And it was SMEs that benefited the most from both cheap and abundant credit. 4/8  Lending rates on very small loans – which are a proxy for lending to SMEs – declined substantially, with firms able to borrow at the lowest rates ever recorded – below 2%. [10] And, since March, € billion in new small loans have been granted to SMEs in the euro area, including € billion to SMEs in Germany. Our policies were key to achieving that outcome. Banks taking part in our TLTROs saw a considerable increase in their credit growth, with loans rising by over € billion in the year up to September. And this dovetailed with government loan guarantees to funnel credit to SMEs, which received more than 70% of all the guaranteed loans granted.
Income distribution of consumer credit borrowers relative to the general population  Sources: Finance & Leasing Association, Society of Motor Manufacturers and Traders (SMMT) and Bank calculations. (a) Annual sterling gross lending to individuals on dealership car finance for new car purchases provided by Finance & Leasing Association members, attributed to personal contract purchase (PCP). (b) Annual transactions on dealership car finance for new car purchases provided by Finance & Leasing Association members, as a proportion of SMMT new car registrations. Sources: NMG Survey and Bank calculations. 20  All speeches are available online at www.bankofengland.co.uk/speeches  20  Chart 15. Stylised PCP deal  Chart 16. Market share objectives as a factor contributing to changes in secured credit (a)(b)(c) availability Net percentage balances (c)  Balance remaining Car value/amount left to repay £  Car value  40  20,000 Deposit  20  18,000 Monthly payments  16,000 0  14,000 Margin  12,000  -20  10,000 Optional balloon payment  8,000 2007  2009  2011  2013  2015  -40 2017  6,000 4,000  5  10  15  20 Month  25  30  35  Source: Bank calculations. Example shown: • Car value at new is £ Car value depreciates 45% after 3 years with most of the depreciation occurring in the first year. • Initial deposit of 10%. • 36 month contract with monthly repayments of £ per month. • Optional balloon payment of £ at the end of the contract.

(b) LCF survey data scaled to match National Accounts (excluding imputed rental income, income received by pension funds on behalf of households and FISIM). LTI ratio is calculated using secured debt only as a proportion of gross income. (c) Repeat cross-section methodology used, with no controls for other factors, or how households may have moved between LTI categories between 2007 and 2009. Chart 3. UK banks’ sterling write-offs on (a) lending to individuals  Chart 4. Household debt to income ratio and (a) consumption growth over 2007-12 Adjusted consumption growth 2007-12, Per cent  10 8 6 4 2 0 -2 -4 -6  United Kingdom  -8 -10  0  Sources: Bank of England and Bank calculations. (a) Write-offs of sterling lending by UK MFIs to UK individuals. Write-offs are net of recoveries. Non seasonally adjusted. (b) Consumer credit consists of credit card lending and other unsecured lending (other loans and advances) and excludes student loans. (c) Lending secured on dwellings. 100 200 300 Household debt to income in 2007, per cent  400  Sources: Flodén (2014) and OECD National Accounts. (a) Change in consumption is adjusted for the pre-crisis change in total debt, the level of total debt and the current account balance. See Flodén, M. (2014), ‘Did household debt matter in the Great Recession?’, available at http://martinfloden.net/files/hhdebt_supplement_2014.pdf. 17  All speeches are available online at www.bankofengland.co.uk/speeches  17  Chart 5. GDP distributions through time, conditional on composite indicators of indebtedness and asset prices  Chart 6.