samchain/econo-pairs-v1 huggingface dataset:
Our inflation forecast therefore always includes an assessment of credit developments and the housing market. As I mentioned earlier, it may be difficult to quantify the risks linked to a rapid increase in house prices and indebtedness over a long period of time using our usual forecasting methods. As the expansionary monetary policy is to a large extent a driving force in developments in house prices and indebtedness, we have considered it reasonable in our monetary policy considerations to  2  BIS Review 12/2006  view these risks as an argument in favour of beginning to increase the repo rate now, rather than postponing the increases for a few months. However, this does not mean that we have set up any target for house prices. I intend to discuss the objective of monetary policy in more detail later. Let me first say a few words on future interest rate developments. Future interest rate developments The inflation forecast contains an assumption of how the interest rate will be adjusted in future. This is a relatively new method of making forecasts for the Riksbank. Like many other central banks, we have previously worked on the assumption of the interest rate remaining at the same level throughout the forecast period. The new method of forecasting also alters the communication and motivation of interest rate decisions somewhat.

Most analyses indicate that the policy rate has very little impact on housing prices and thus also on household indebtedness.17 Using the repo rate would be justified if what we were seeing was a credit boom throughout the Swedish economy. But this is not what we are seeing. Household indebtedness is increasing at approximately the same rate as disposable incomes. The rate of growth in bank lending to companies typically varies with the business cycle, and at present this rate is low (see Figure 11). All in all, credit growth is relatively low in the Swedish economy. Figure 11. Lending to households and companies from monetary financial institutions Annual percentage change 20  20  15  15  10  10  5  5  0  0  -5  -5  Total lending from monetary financial institutions Companies Households  -10 03  04  05  -10 06  07  08  09  10  11  12  13  Source: The Riksbank. Another problem with using monetary policy to influence household indebtedness is that this also has an impact on the exchange rate. All else being equal, higher interest rates lead to a stronger currency and, again all else being equal, a stronger currency leads to lower inflation and lower resource utilisation. There are thus clear costs associated with using monetary policy in this way. The alternative – and a better one – is to separate monetary policy from the policy that aims to promote financial stability.
On the structural side, globalisation may have reduced the responsiveness of inflation to domestic cyclical conditions but empirical evidence for the euro area is not clear-cut.3 Other potential factors include demographic trends or changes in behaviour triggered by technological developments, which may contain price pressures, for instance through increased price transparency. However, even if these factors are somewhat more persistent, they should still not exert a permanent impact on inflation. Overall, the analysis indicates that the relationship between growth and inflation remains largely intact, even if it has temporarily weakened in recent years to the extent that the speed of adjustment in inflation towards our aim has been affected. Looking ahead, we anticipate that headline inflation will resume its gradual upward adjustment, supported by our monetary policy measures. At the same time, uncertainties continue to prevail. In particular, the recent volatility in financial markets, notably also in the exchange rate, deserves close monitoring with regard to its possible implications for the medium-term outlook for price stability. Therefore, while the strong momentum of the euro area economy has clearly strengthened our confidence in the inflation outlook, patience and persistence with regard to monetary policy is still needed for inflation to sustainably return to levels of below, but close to, 2%.

Philipp Hildebrand: The Swiss National Bank and the financial crisis Summary of a speech by Mr Philipp Hildebrand, Chairman of the Governing Board of the Swiss National Bank, at the Club of Rome Forum, Zurich, 20 January 2011. The complete speech can be found in German on the Swiss National Bank’s website. *  *  *  Since August 2007, central banks have been continually at work, fighting the crisis. They have had to stabilise the financial system and limit the extent of the economic downturn. In many countries, the repercussions of the financial crisis are reflected in both government finances and central bank balance sheets. In Switzerland, these repercussions – i.e. the costs of the financial crisis – have had relatively little impact on the budgets of either the Confederation or the cantons. The costs are mainly to be found in the SNB’s balance sheet, at the moment largely in the form of risks. The SNB balance sheet has significantly lengthened, particularly as a result of foreign currency purchases. Inevitably, the large holdings of currency investments means greater risk. As the SNB announced on 14 January 2011, it is expecting a substantial loss for the year 2010. This is mainly attributable to exchange rate losses on foreign currency investments. In view of these losses, it is very tempting to argue that the SNB should not have purchased any foreign exchange. However, the purpose of the SNB is not to make a profit.
Taking into consideration of this, the Central Bank, when deemed necessary, will always continue to take additional measures within its means prudently in order to ensure the smooth functioning of the FX market and to support FX liquidity. In this framework, in the event of further intensifying of the financial turmoil in global markets that might have negative impacts on the Turkish economy; (i)  Under the basic principles of the floating exchange rate regime, if unhealthy fluctuations are witnessed in the foreign exchange market due to a decrease in the depth of the market foreign exchange selling auctions will be held  BIS Review 3/2009  9  (ii)  Transaction limits for banks in the Foreign Exchange and Banknotes Markets will be raised,  (iii)  The FX required reserve ratio might be further reduced to a limited extent. The Central Bank will continue to closely monitor exchange rate developments in 2009 and will directly intervene in the market in case of any unhealthy fluctuations in the exchange rates due to speculative behavior stemming from a decrease in the market depth. Moreover, the purchase/sale transactions of “foreign exchange against foreign exchange,” “foreign exchange against foreign banknotes” and “foreign banknotes against foreign banknotes” conducted between the Central Bank and institutions authorized to operate in the Foreign Exchange and Banknotes Markets will continue in 2009.

For instance, while an unexpected and strong monetary tightening was implemented in the face of capital outflows in the May-June 2006 period, an expansionary monetary policy was adopted following capital outflows in the last quarter of 2008 (Chart 4). The contradiction between these two responses can be explained mainly by the significant differences between the said two periods in terms of both economic conjuncture and the sources of the shocks. As both domestic demand and external demand were strong in 2006, the exchange rate movements triggered by capital outflows had the potential to rapidly damage disinflation and inflation expectations. However, in 2008, it is observed that the downward pressure of the global recession and weak domestic demand conditions on the inflation has come to the forefront. 4  BIS Review 3/2009  Chart 4. Policy rates and market interest rates in the 2006-2008 period  26  Policy Rate (Compound)  June 2006 24  Secondary Market Benchmark Interest Rate (Compound)  22 20 18 16 14  November 2008 06.11.2008  18.09.2008  06.08.2008  24.06.2008  09.05.2008  26.03.2008  12.02.2008  28.12.2007  13.11.2007  27.09.2007  14.08.2007  02.07.2007  18.05.2007  05.04.2007  21.02.2007  09.01.2007  22.11.2006  05.10.2006  22.08.2006  10.07.2006  26.05.2006  12.04.2006  28.02.2006  16.01.2006  12  Source: CBT and ISE. In sum, it is seen that the inflation-targeting regime has provided a significant amount of flexibility to take the necessary measures in the face of high-level shocks.
This has resulted in an extension of the clearing obligation to all standardised OTC derivatives; (ii) improve their resilience by further strengthening their risk management framework, as the concentration of clearing among a small number of entities requires a particularly robust framework. The principles applicable to financial market infrastructures have also been strengthened, with the publication in 2012 of the Principles for Financial Market Infrastructure (PFMI). This is still the reference text for market infrastructure regulation today. In Europe, these PFMI were translated into hard law through the European market infrastructure regulation (EMIR), which was adopted in 2014 and is applicable to CCPs and central trade repositories. (d) Better regulate the non-bank financial system to enable sound market financing: the aim is to strengthen supervision of shadow banking as the financial crisis showed that the accumulation of risks on the periphery of the banking system, sometimes without effective oversight, could have devastating effects. We now have a better understanding of the non-bank financial system, thanks to the FSB’s mapping work, which makes it possible to measure its developments and the risks associated with it. The FSB has also worked to strengthen investment fund regulations to better manage liquidity risk – recent episodes of massive capital outflows by UK and French funds have demonstrated the importance of managing this risk well – and leverage risk.

What is more, monetary policy and low rates also have positive effects for banks, such as a reduction in their cost of risk and increase in their lending volumes. However, the fact remains that the current environment is compressing net interest margins for retail banks, which finance themselves with deposits – and not at variable rates in the markets – and is lowering returns on insurers’ investments. The second risk, which is more structural, is the digital transformation of finance, which is revolutionising modes of use and bringing significant benefits to customers. However, adapting to this change requires huge investment by banks, to adjust their information systems and develop new, personalised service offerings. The digital transformation is also putting downward pressure on revenues due to increased competition from new market entrants (neobanks, GAFA, etc.). In response to this, financial institutions need to unleash new productivity gains, by exploring even further the possibilities of automation and artificial intelligence (AI), and adapting their branch networks on all levels (size, , density). The digital transition is also leading to a rising threat of cyber risk and, more broadly, operational risks (large-scale theft, data corruption), to which financial institutions are more than ever exposed. 4/7  BIS central bankers' speeches  Last, financial intermediaries also have to adapt to a new imperative – the need to take account of the risks linked to climate change, which I shall come back to later.
Otherwise disruptions could materially impair the supply of credit (and equity) to the economy, with macroeconomic and other welfare costs. When the securitisation markets closed in the USA, it was not realistic for that part of the credit system to be reintermediated by the banking system in short order. The essential ingredients of a resilient market include a robust post-trade infrastructure for clearing and settlement. But trading platforms matter too, as do disclosure standards, and even the pattern of demand. In my book, a market is unlikely to be resiliently liquid if demand is almost entirely from leveraged investors and traders: not only do they vanish when prices stop rising, but prices are then subject to the sudden force of gravity. Much of the  3  Anil Kashyap, Raghuram Rajan and Jeremy Stein, “Banks as liquidity providers: an explanation for the coexistence of lending and deposit-taking”, Journal of Finance, February 2002. 4  See “Shadow Banking, Financing Markets and Financial Stability”, Tucker, January 2010. The Financial Stability Board released a first paper on Shadow Banking earlier this week. 4  BIS central bankers’ speeches  securitisation markets would have failed those tests from around the middle of the past decade. That is a lesson we and our successors will need to recall when contemplating future innovations. Over time the Financial Policy Committee will need to consider whether, as a matter of fact, core capital markets in the UK are sufficiently resilient for stability to be preserved in stressed conditions.

However, the treatment of OFCs varies a lot across the G718, and so their data are not strictly comparable with the UK M4 numbers. More important, so far as I can tell, most current calculations of world money growth19 simply add up domestic money supplies, and so leave out cross-border money holdings. That might be a material omission. For example, external holdings of sterling deposits with the UK banking system have increased by more than domestic money since the late 1990s; and by around 15% over the past year. How much of this growth is attributable to non-bank financial groups, whether based in the UK or overseas, is not known. Like much of the monetary analysis of the early 1980s, I fear that this is rather inconclusive, other than underlining that one has to get one’s hands dirty in analysing the money numbers. It is plausible that a decent chunk of recent UK M4 growth should be seen in the light of structural change in the financial system. Essentially, some types of non-bank financial intermediation have become more significant, and seem to have entailed higher money holdings on the definitions currently employed. If so, recent OFC money growth does not of itself obviously have malign implications for money spending and inflation. Originate and distribute: what’s going on on bank balance sheets? Much of the debate about this renewed process of disintermediation has revolved around whether the burgeoning growth of, for example, structured credit vehicles and hedge funds increases or impairs the resilience of the system.
Jan F Qvigstad: On learning from history – truths and eternal truths Speech by Mr Jan F Qvigstad, Deputy Governor of Norges Bank (Central Bank of Norway), at the Norwegian Academy of Science and Letters, Oslo, 13 November 2012. The text below may differ from the actual presentation. This speech does not contain assessments of the economic situation or current interest rate setting. *  *  *  I have received valuable assistance in preparing this speech. Outside the Bank, I would like to thank Mike Bordo, Marc Flandreau, Henrik Mestad, Henrik Syse and Knut Sydsæter. At the Bank, I would like to thank the following persons in particular for their contributions: Øyvind Eitrheim, Amund Holmsen, Jon Nicolaisen, Øystein Olsen, Øystein Sjølie, Birger Vikøren NS Mari Aasgaard Walle. I would also like to thank Helle Snellingen for her contribution to the translation of the text into English. Introduction All scientific and scholarly disciplines have a particular, and not immutable, set of truths. Mathematics and theology are possible exceptions, though for different reasons. As the late Professor Knut Sydsæter underscored when assisting me with this speech; in mathematics new results are proved on the basis of fundamental axioms and become new truths. Theology also relies on truths, even eternal truths. Even if logical proofs of God’s existence have long been an important pursuit, it is safe to say that the truths in theology today stem from faith.

Prices adjust automatically to supply and demand, and the general view was that  Newton’s theory shown to be insufficient, during the solar eclipse of 1919. Scientists were then able to observe that the light from distant stars was bent by the Sun’s gravity, just as Einstein had predicted. Many scientists once believed that the Earth looks the way it does, with mountains and valleys, because the Earth was originally a red-hot mass that gradually shrivelled as it cooled. We know what an orange looks like after a long drying process or what clay looks like after being exposed to the air for a time. What was a smooth surface becomes wrinkled. It was 100 years ago this year that the German meteorologist Alfred Wegener proposed an alternative theory of continental drift. He used heuristic arguments based on studies of coastlines. Brazil has a coastline that is an apparent perfect fit with the Gulf of Guinea on the west coast of Africa. Even so, the theory was not accepted until it was given a proper theoretical foundation and empirical grounding. The breakthrough came 50 years ago, when the American geologist Harry Hess proposed his theory of sea-floor spreading, and by the end of the 1960s the theory of plate tectonics became established science. The Centre for Advanced Study, which is located here in the Academy, recently hosted a research group that is at the very international forefront of this field.
Financial soundness improved, while capitalisation and liquidity stand at optimal parameters, at 16% and 4%, respectively. According to the latest data, as at November 2015, the performance of deposits was positive, increasing over EUR 130 million, thus confirming the public trust in the banking system. BIS central bankers’ speeches  1  After long-standing efforts, having increased for seven years, we provided for the reduction of non-performing loans below 20%. The lowering of the non-performing loans ratio, as financing costs in the financial market stand at minimum historical levels, allows for a reliable recovery of credit to economy in the period ahead. We believe that, as a result of the joint action plan with the Government, the non-performing loans ratio will continue to fall in the year ahead. Also, in 2015, a new investor, the American Bank of Investments, entered the banking market, being the first one after 2009. We consider the new investment as a very positive development for the promotion of competition within the system. The Bank of Albania will continue to promote banking system consolidation and adhere to rigorous requirements for a responsible and proactive management of each bank. In 2015, the most delicate developments coincided with the complex political and financial situation in Greece. The banking sector in general and individual banks in particular weathered with success all the difficulties. The Bank of Albania, in addition to the constant monitoring of developments in Albanian banks with Greek capital, intensified the communication with the respective authorities in Greece and in the euro area.

In summary, the baseline scenario considers a reduced external impulse associated to slower world growth and somewhat tightened external financing conditions. It also considers that new stress episodes will occur in external financial markets (table 2). As has been observed in recent months, these events can be triggered by negative news coming from the fiscal accounts, economic growth and the banking situation in the Eurozone. The feeble external outlook contrasts with the performance of Chile’s domestic demand and output in the last few quarters. In the first quarter of this year, GDP grew 5.6 percent, exceeding forecasts in the March Monetary Policy Report. In quarter-on-quarter terms, it expanded at trend rates, leading the Board to estimate that output gaps are still narrow. This view is based on the fact that, although the labor market continues to show signs of being tight, these signs have not intensified: employment has reduced its rate of expansion, the unemployment rate has settled at low levels and y-o-y growth in wages, while still strong, has moderated lately. In the first quarter, domestic demand grew somewhat less than output, but private consumption and investment are still robust. Inflation has behaved favorably in the past few months, below March’s forecasts. This, combined with oil prices falling in external markets, has reduced the risks that were envisioned then for its short-term trajectory.
I do not intend today to discuss the merits of the various ongoing regulatory initiatives. Rather I want to briefly comment objectively on their impact on the state of financial markets. It is clear that many individual regulatory initiatives are not yet parameterised or sufficiently detailed for market participants to anticipate their effects fully. And the extent to which regulations might eventually differ across geographical and legal jurisdictions is also still unclear. There is no implied criticism here – re-designing the regulatory frameworks for, among others, banks, insurance companies and rating agencies, takes time, and a lasting, well-planned robust set of regulations that will stand for many years to come is surely preferable to a hastily-agreed but inadequate framework. The authorities nationally and internationally are pushing the agenda hard to come up with the right decisions as quickly as possible. The progress of the regulatory agenda has, however, created additional uncertainty in financial markets which is reflected in investor behaviour and in some market prices. For example, market intelligence suggests that it is one of the factors contributing to the continued elevated funding costs for many banks. In due course, the various regulatory initiatives will produce detailed rules. As that happens one can expect a variety of reactions. On one level, there is likely to be some shift of activity between markets and business models as participants evaluate where the new rules establish new incentives.

Chart 2  Chart 3  Advanced economy corporate bond spreads(a)  Implied volatilities in selected markets(a)(b)  Basis Points 1000 Non-investment grade 900 corporates (RHS) 800 Investment grade 700 corporates (LHS) 600  Basis Points 2500  2000  1500  500 400  1000  300 200  500  100 0 2005 2006 2007 2008 2009 2010 2011  0  Sources: Bank of America/Merrill Lynch. (a) Option-adjusted spreads over government bond yields. Sources: Bloomberg, British Bankers’ Association, Chicago Mercantile Exchange, Euronext.liffe, JPMorgan Chase & Co. and Bank calculations. (a) Three-month option-implied volatilities. (b) Data to close of business on 14 June 2011. (c) WTI crude oil. (d) Average of FTSE 100, S&P 500 and Euro Stoxx 50. (e) Average of five-year on-the-run iTraxx Europe main and CDX North America investment-grade. (f) Average USD/GBP. of  USD/EUR,  EUR/GBP  and  (g) Average of three-month short sterling, eurodollar and Euribor. BIS central bankers’ speeches  3  Chart 4  Chart 5  Bid-ask spreads on selected assets(a)(b)(c)  International equity prices(a)  Corporate bonds  Indices: 2 January 2007 = 100 120  Indices: January 2005 = 100 1400  Government bonds Equities (d)  110  1200  100  1000  90  Commodities Currencies Interest rate swaps  80  800  70  600  Euro Stoxx 60  FTSE All-share  400  S&P 500  0 2005 2006 2007 2008 2009 2010 2011  Sources: Bloomberg, calculations.