samchain/econo-pairs-v1 huggingface dataset:
The next 12 months will see a rapid change in measured inflation. In the UK, it is likely to return to its target by the middle of the year, as the one-off effects of Covid wash out of annual inflation rates. Thereafter, the MPC foresees UK inflation remaining around its target level. The risks around this projection are, in the MPC’s judgement, large but balanced. That these risks are large is fully justified by the high degrees of uncertainty that exist around the forces driving inflation in future, as I have discussed here. But given likely trends in these factors, my judgement is that the risks to inflation in the UK are skewed to the upside, rather than being balanced. Certainly, there are good grounds for believing future inflation may behave very differently than in the past. My judgement is that we might see a sharper and more sustained rise in UK inflation than expected, potentially overshooting its target for a more sustained period, as resurgent demand bumps up against  22  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  22  constrained supply. Financial markets globally have begun pricing this possibility recently, with measures of inflation expectations rising in the US and, to lesser extent, euro-area (Chart 17). Chart 17: Tail Risk in US and Euro-area Inflation Expectations. Source: Bloomberg Finance L.P and Bank calculations. Note: Tail risk is the option-implied inflation tail risk, 5-years ahead measured at the 95th percentile. Inflation is the tiger whose tail central banks control.

In that light, it is worth assessing the likely forces acting on inflation in the period ahead and possible alternative inflation scenarios, both to the upside and downside, around the central path. In a  highly-uncertain environment, where robust policy may call for avoiding tail outcomes rather than optimising around a central path, this scenario-based or risk-management approach seems particularly valuable. 2 I begin by discussing the powerful disinflationary forces at work over the past several decades at the global level. There is a reasonable chance these trends could persist, and indeed be amplified by the Covid crisis, posing downside inflation risks. In the following section, I then consider whether those disinflationary forces could abate, or even reverse, in the period ahead. If so, this would generate an upside inflationary scenario. Given high degrees of uncertainty, it would be spuriously precise to assign probabilities to either scenario. But given the width of the MPC’s fan charts both are clearly plausible paths, sufficiently so to weigh in monetary policymakers’ risk-management considerations when setting policy, now and looking forward. Friedrich von Hayek once referred to inflation control as akin to trying to catch a tiger by its tail. 3 That metaphor seems apt today. For many years, the inflationary tiger slept. The combined effects of  unprecedentedly large shocks, and unprecedentedly high degrees of policy support, have stirred it from its slumber. In this environment, the tiger-taming act facing central banks is a difficult and dangerous one.
Thanks to financial engineering and innovative products, only a small portion of financial institutions’ assets is in government securities. Therefore, asking for government securities as collateral in open market operations would no longer provide enough liquidity to the financial system. In the meantime, as banks have lost their dominance in the financial system, corporations and non-bank financial institutions have joined the conventional banks as the counter parties of central banks in market transactions. The question in this context is (1) whether the innovative policies we have seen in the last year will lead to longer-term changes in central banking doctrine and behavior, (2) whether in parallel to new developments in financial structure central banks will adopt a more flexible approach in operational practices, and (3) maybe more importantly whether central banks will maintain their influence in the financial markets, which has grown rapidly due to extraordinary actions during current crisis? These are important questions to discuss and I hope this conference would provide new insights to policy makers as we sail through uncharted waters. While concluding my remarks, I would like to extend my thanks to the members of the Forum Istanbul, who have contributed to the constitution of constructive criticism environment that I perceive as an important element in building the future of Turkey. Thank you for your attention. 4  BIS Review 73/2010

For the first time, these exercises will be conducted in a fully integrated way – under the aegis of the SSM – with full accountability of the results. Completion should mark a turning point where there will be no more doubts about the sustainability of our banks and credit should resume at a normal pace. 3. In the longer run, a major policy challenge for the euro area is to “reinvent” a new and robust financial integration model. We need sound cross-border capital flows,  BIS central bankers’ speeches  1  because we do not want the Eurosystem to intermediate permanently between borrowers and lenders from different countries. Developing a safe securitisation process should be a priority, despite the major technical difficulties. II/ – Is Europe facing the prospect of a lost decade? Questions about long-term growth are not limited to Europe. What we hear about our continent reflects a more general concern: the possibility of “secular stagnation” in advanced economies. Larry has launched this crucial debate. I don’t know whether he was thinking specifically about Europe, but, of course, this question is very relevant for us. Secular stagnation rests on the assumption that the natural interest rate is negative. This may happen for two reasons: •  In the short run, we may have a downward shock on demand and an increase in savings resulting from the deleveraging process. I have just explained how we are currently addressing this issue.
The US central bank, the Federal Reserve, has taken measures to safeguard financial stability. The unease we see in the markets is on a global level and affects us all, but the financial crisis is mainly centred on the United States. We are not isolated The Swedish financial system has functioned well and the banks have been able to finance themselves both in Sweden and in the international capital markets. The overnight rate, the shortest interest rate in the economy, has remained stable around the repo rate. In this way the Riksbank’s system for steering the interest rate works well. But as I said, up here in Scandinavia we are not isolated from what is happening in the world around us. Swedish  BIS Review 115/2008  1  banks are now affected more tangibly than before by the global financial turbulence even though they only have small exposures to the US mortgage market, which is the centre of the crisis. Interest rates have now risen substantially here, too, for instance on the interbank market. This is the market where the banks borrow money from one another to cover their short-term liquidity needs. Let me stress, however, that higher interest rates are not the same thing as the Swedish banks experiencing problems, although it is becoming more expensive for them to borrow money. The Swedish banks have had a good development in profits in recent years and they are financially strong. They have a good starting position to meet higher costs.

Measures to ensure the markets function efficiently But the markets have not functioned as efficiently as usual. For instance, interest rates in the interbank market have risen as a result of the increased uncertainty. There has also been a surge in the demand for treasury bills. The Swedish National Debt Office and the Riksbank have maintained a regular dialogue regarding the money and bond markets and the need to counteract the effects of the US financial crisis. Last week the Debt Office decided in consultation with the Riksbank to issue treasury bills at a number of additional auctions to meet the large increase in demand. The funds from the auctions will be invested in what is known as covered mortgage bonds. This improves the way the market functions right now. To ensure that the financial system functions as well as possible, the Riksbank has also implemented some other measures for preventive purposes. On Monday we decided, to put it simply, to increase the access to credit for participants in the RIX payment system. One can say that we are oiling the wheels of the system by making it easier for participants to make their payments to one another during the course of the day. They can now to a greater extent use their own covered bonds, or those issued by an institution with close links, as collateral in the system. A covered bond has collateral in the form of, for instance, a mortgage, which is provided by the credit institution that has issued the bond.
The goal, of course, is to be able to resolve distressed giant institutions, complex institutions, without taxpayer solvency support, but also without disastrous disruptions to the flow of essential financial services to our economies. I would say two substantive things about the tools needed to make this feasible. First of all, as the crisis around the world has demonstrated, we need to extend the basic resolution toolkit I was talking about beyond commercial banks to bank holding companies and to affiliated companies; in other words, to groups. And we must extend the scope of the basic resolution regime to non-bank financial institutions and groups in circumstances where their distress could prove systemic. This is essentially what the Dodd-Frank Act does in the United States. It makes it possible for the FDIC to manage and run down a SIFI from a bridge company. This could work well in some circumstances; for example, where there are buyers for parts of the business in the wings, as with Lehman. This is, therefore, a resolution instrument which we should seriously contemplate adopting in Europe. I am not certain that it would definitely work in all circumstances; eg if there were no buyers in prospect, the state ends up running the group, which could be quite a thing, with a risk that staff and counterparties may drift away. But even in those circumstances it would surely be preferable to a normal liquidation.

Paul Tucker: Developing an EU cross-border crisis management framework Remarks by Mr Paul Tucker, Deputy Governor for Financial Stability at the Bank of England, at the Eurofi Financial Forum, Brussels, 30 September 2010. *  *  *  Thank you very much for inviting me to join you here today. It is terrific that the EU, and the Commission in particular, have been taking resolution really seriously as part of the programme for reforming the financial system. This is a domestic issue, an EU-wide issue, and a global issue. In introducing this session of the conference I’ve got five points, and I’m going to try to be quite crisp on those five points once I have made an introductory comment about resolution regimes in general. It may be helpful to say a few words about what resolution is. Resolution is what happens when we are in the “last chance saloon”. That is to say when supervision, however enhanced, has not prevented distress. When higher capital and liquidity requirements have proved insufficient. When any Cocos or other instruments have been converted or written down but have proved insufficient to absorb the distressed firm’s losses, and so the institution is still teetering on the edge of failure. That is we are talking about the point at which all the usual remedies have been exhausted, and the authorities face a desperate choice between taxpayer bailout or chaotic liquidation unless special resolution tools are available. All those other, essential measures are about reducing the probability of distress.
I would also like to recall the unanimous recommendation we submitted on the voting modalities of an enlarged Governing Council, which has been accepted by the EU Council and is about to be ratified within these days by all Member States. This will allow the ECB to maintain efficiency and timeliness of decision-making in an enlarged euro area. Eventually, enlargement of the EU will lead to the extension of the euro area, as the new Member States are expected to adopt the single currency at some point in the future. In fact, upon EU accession, they will be committed to striving towards the eventual adoption of the euro. The main aim of the Eurosystem in the process towards euro adoption is to ensure that the monetary integration of each new Member States proceeds in a smooth manner and in line with Treaty provisions. In view of this challenge, at the end of last year the Governing Council of the ECB adopted a policy position paper on exchange rate issues relating to the acceding countries. The Treaty foresees that at some point following accession, new Member States will join the Exchange Rate Mechanism II (ERM II). To ensure a smooth participation in ERM II, however, it would be necessary that major policy adjustments - for example with regard to price liberalisation and fiscal policy - are undertaken prior to participation in the mechanism and that a credible fiscal consolidation path is being followed.

The more flexible labour, product and financial markets are, the lower the employment and income losses in response to adverse domestic and global economic developments will be. Moreover, given that demographics in the euro area are less dynamic than in other economies, including the US, we need even more improvements in terms of higher productivity growth, rising labour force participation and declining structural unemployment. The case for decisive structural reforms is therefore pressing. Structural reforms are generally associated with changes in the long-term equilibrium demand and supply conditions of an economy and changes in the relative prices of goods and services. The transition from the pre-reform to the new post-reform equilibrium conditions normally takes time and within this period some resistance and uncertainty may occur. For this reason the implementation of structural reforms requires a strong leadership, a great deal of courage and a tireless explanation activity. It is very important to make it clear to the public that, if governments, Parliaments and social partners deliver those reforms, the benefits will be significant. In capital markets, structural reforms should aim at allowing a more effective allocation of savings toward the most rewarding investment opportunities. Since the introduction of the euro, the pace of capital market reform has been impressive. This includes policy-induced reform, such as the Financial Services Action Plan initiated by the European Commission in the spring of 1999 or the development of national legal frameworks governing the issuance of mortgage bonds.
For Chile, baseline projection in March 2011's Monetary Policy Report. Sources: Bloomberg and Consensus Forecasts. Figure 10 Incidences on annual CPI inflation (1) (2) (percentage points) 12  12  9  9  6  6  3  3  0  0  -3  01  02  03  04  05  06  07  08  09  10  11  12  13  Othe r (64.7%)  Fre sh fruits and ve ge table s (2,9%)  Foodstuffs w /o fre sh fruits and ve ge table s (21.3%)  Fue ls (5.7%)  Public utilitie s (5.4%)  Total  -3  (1) Gray area, as from first quarter 2011, indicates breakdown of inflation forecast in baseline scenario. (2) In parentheses, shares in CPI basket. Sources: Central Bank of Chile and National Statistics Institute (INE).

In the case of housing, rents reflect the flow of benefits obtained from housing assets—either the monetary return from rental property, or the value of living in owner-occupied housing. Historically, the ratio for the nation as a whole has had many ups and downs, but over time it has tended to return to its long-run average. Thus, when the price-to-rent ratio is high, housing prices tend to grow more slowly or fall for a time, and when the ratio is low, prices tend to rise more rapidly. I want to emphasize, though, that this is a loose relationship that can be counted on only for rough guidance rather than a precise reading. Currently, the ratio for the country is higher than at any time since data became available in 1970— about 25 percent above its long-run average. Of course, the results vary widely from place to place. For Los Angeles and San Francisco, the price-to-rent ratio is about 40 percent higher than the normal level, while for Cleveland the ratio is very near its historical average. Closer to home, the figure for Seattle is just over 35. For Portland, it turns out that the price-to-rent ratio is a bit anomalous. Unlike the ratio for the nation and many of the cities I’ve mentioned, Portland’s ratio has been trending up, and this pattern has been going on since the late 1980s.
The floating exchange rate system has served well in the conduct of monetary policy. As in the past, the Central Bank interventions in the foreign exchange market would be limited to building up the international reserve position and to stabilise any undue fluctuations in the foreign exchange market due to excess or shortage of international currencies. As per available international data, the global economy is projected to grow at around 5 per cent in 2006 and is expected to moderate to around 4.7 per cent in 2007. Sri Lanka’s major export markets such as the United States of America (USA) and the Euro area and other trading partners are also expected to grow at healthy rates. It is therefore likely that the continuation of favourable global economic conditions will generate healthy external demand for Sri Lanka’s goods and services. Based on the external and internal factors, the Sri Lankan economy is expected to grow by 7.5 per cent in 2007. Growth is also expected to be broad-based, with all three sectors, Agriculture, Industry  1  Broad Money (M2b) is complied consolidating the operations of the Central Bank and operations of domestic banking units and off shore banking units (OBUs) of commercial banks. 2  The money multiplier is the amount of money created by an additional unit of reserve money. BIS Review8/2007  7  and Services, poised to grow at healthy rates.

In keeping with its primary objective, the Central Bank has also been very concerned about the inflationary impact of the regular use of Central Bank’s Reverse Repo window by some commercial banks which appear to use such window as a convenient instrument of regular funding. We wish to clearly discourage this practice in 2007 and therefore, with effect from 1st January 2007, the Reverse Repo facility of the Central Bank will not be made available on days when there is a liquidity surplus in the commercial banking system, according to our estimates. We would also closely monitor the Banks that seek this facility regularly to ascertain whether they are doing so because of any structural deficiencies that they are suffering from. 4  BIS Review 8/2007  We also noted that the financial sector grew with increased resilience, possibly benefiting from robust economic growth and a rather favourable external environment. Profitability, capital funds and asset quality of banks improved, leading to strengthening of capacity of the financial sector to absorb shocks. In the meantime, interest rates across markets rose in response to gradual tightening of monetary policy; turnover in the foreign exchange market recorded substantial increases; and market capitalisation and price indices in the equity market continued to improve.
Furthermore, in order to represent any meaningful part of the default waterfall, “skin in the game” would need to increase dramatically, thus completely changing the size of CCP balance sheets and their business models. This could even defeat the purpose of mandatory central clearing by pushing CCPs to dramatically increase the cost of clearing, or to compromise on their risk management in order to retain profitability. In sum, it seems reasonable that an increase in prefunded resources, should it become necessary, should be mainly borne by clearing members. Strengthening CCP recovery capabilities via specific recovery tools. An alternative conclusion to our current discussions could be that cover 2 is an appropriate standard for ensuring CCP resilience in a pre-recovery phase, but that more reassurances are needed to ensure CCPs can adequately cope with a recovery situation if they face tail losses. Let me stress that, here too, it is too early to state whether and, if so, what additional guidance regarding recovery capacities will be needed. However, let us think about the ways in which authorities could improve CCP recovery tools if the need did arise.13 In a recovery situation, a significant amount of additional funding could come from ex post cash calls on non-defaulting clearing members, also referred to as “default fund top-ups” or “emergency assessments”. This could provide CCPs with ample resources to avoid a complete depletion of their capital, and would share the funding burden across the whole clearing membership.

In that case, this option will be available and there should be no technical obstacles to using it. But there can be no commitment from the central bank to provide liquidity, and that’s a basic principle of central banks in general, not only for CCPs but for banks as well.16 In sum, while some of these tools appear more appropriate than others, all of them imply drawbacks, and authorities will need to proceed cautiously if they favour one over another. CPMI-IOSCO is currently reviewing existing CCP recovery mechanisms, including loss allocation tools, and will consider developing more granular standards for CCP recovery planning if that is needed. 15  See Duffie, D., “Resolution of Failing Central Counterparties”, Graduate School of Business, Stanford University, 17 December 2014. 16  The recent agreement between the ECB and the Bank of England is no exception to this rule. We’ll extend the scope of our standing swap line in order to facilitate the provision of multi-currency liquidity support to CCPs established in the UK and euro area, but again, there is no pre-commitment and the provision of liquidity remains at the full discretion of the central bank issuing the respective currency.