samchain/econo-pairs-v1 huggingface dataset:
Mervyn King: Monetary policy – many targets, many instruments. Where do we stand? Remarks by Mr Mervyn King, Governor of the Bank of England, at the IMF Conference on “Rethinking macro policy II: first steps and early lessons”, Washington DC, 16 April 2013. *  *  *  I would like to thank Charlie Bean, Alex Brazier, Spencer Dale, Andy Haldane and Iain de Weymarn for helpful comments and suggestions in preparing these remarks; and in particular Tim Taylor who I regard as a co-author, although he is absolved of any errors in the current draft. Introduction The past five years has been an extraordinary period for central banks. The breadth and scale of our operations has expanded in ways that were previously unimaginable as we responded to a crisis in the banking sector and the wider economy. In monetary policy, we have moved into uncharted territory. But has our notion of what central banks should do, and how, changed? Now is a good time to reflect on where we stand. I want to focus my remarks on two areas. First, I want to draw out what have we learned about the objectives of monetary policy. Second, I want to reflect on the implications of the proliferation of instruments that have been used to meet those objectives. Objectives For over thirty years the objective of central banks was clear. It was to set monetary policy to achieve long-run price stability.

I also wish that our commitment to achieve future success of the industry as reflected in this event by the joint efforts and collaboration of the regulators, the industry, the market participants and the relevant parties will be further enhanced moving forward. In this regard, I would again congratulate AIBIM on its continuous effort undertake the initiatives in promoting Islamic finance, particularly by organizing this event. 2  BIS Review 115/2006  On this note, I wish you a successful and eventful week. Dengan lafaz Bismillahirrahmanirrahim, saya dengan sukacitanya merasmikan pelancaran "Kuala Lumpur International Islamic Financial Expo 2006". Thank you. BIS Review 115/2006  3
Realism and flexibility do not contradict our clear task of ensuring price stability over the medium term. On the one hand, our price stability range is set comparatively low and forms an anchor for low inflation expectations. On the other hand, we have repeatedly proved that we are prepared to act decisively if price stability is at threat. The preference for low inflation and the Swiss franc’s role as a safe haven could see the SNB policy rate reaching the effective lower bound again in future. Unconventional monetary policy instruments are thus likely to continue to have an important part to play in Switzerland going forward. Even a somewhat higher level of interest rates worldwide is unlikely to change this. Our definition of price stability has proved its worth for Switzerland as a small open economy with an internationally important currency. However, the definition that is best suited to the successful pursuit of monetary policy will vary from country to country. Besides the definition of price stability, effective monetary policy over the long term also hinges on a narrow central bank mandate. IV. Do not overburden the mandate In recent years, some in politics and among the public have time and again looked to central banks with regard to issues that go beyond the core task of monetary policy, namely price stability. Central banks have come under pressure to interpret their mandate more broadly and take on new tasks.

Our definition of price stability is particularly beneficial for a small, open country such as Switzerland that is exposed to strong external shocks. Other approaches would have often required more drastic and disproportionate monetary policy responses in recent years. Given the openness of our economy, fine-tuning inflation is unrealistic. Our strategy has thus also made a significant contribution to the credibility of our monetary policy. The SNB’s mandate is clearly focused and should remain so, regardless of important societal problems such as climate change and the financing of pension provision. A narrow mandate allows a central bank to concentrate on the essential task of ensuring price stability, but is also of fundamental importance in safeguarding its independence. Independence seeks to achieve and requires distance from politics. This distance is therefore not something to be given up lightly. Page 12/16  Chart 1  Chart 2  Page 13/16  Chart 3  Chart 4  Page 14/16  Chart 5  Chart 6  Page 15/16  Chart 7  Chart 8  Page 16/16
3/8  BIS - Central bankers' speeches  An equally important aspect of the current monetary policy response relates to the existing high level of uncertainty, which affects both the nature of the shocks and their persistence, and how our measures will ultimately influence inflation throughout the monetary policy transmission channel. In light of this, firms' and workers' long-term inflation expectations are key to defining the optimal response. If the expectations remain firmly anchored to the target, as there is full confidence in the ECB's commitment to getting inflation back to its target, the monetary policy response could be less forceful. Conversely, if they rise above the target, monetary policy will have to act more forcefully. As I mentioned earlier, inflation surged in the euro area and has gradually proven more persistent and spread to a higher number of goods and services in the consumption basket. This has led to successive upward revisions to projected inflation, including the medium-term projections. In tandem, second-round effects via wages or mark-ups have been moderate, but the greater persistence of inflation has increased the risks of a deanchoring of medium-term inflation expectations. Against this backdrop, the ECB's response has been to tighten monetary policy, combining gradualism and forcefulness in an effort to keep inflation expectations anchored. The normalisation of our monetary policy began in late 2021 with the announcement that net asset purchases would cease by the end of the first half of 2022.

As an introduction to this FSR, we are extremely thankful to the roundtable participants that have accepted my invitation: •  A long-standing member of the Federal Reserve board: Governor Tarullo, thank you. It’s a privilege to welcome you today given your active participation and role in setting international financial regulation;  •  A Governor of one of the most advanced central bank in the area of macroprudential policy in Asia: Tae Soo Kang, Deputy Governor of the Bank of Korea, in charge of Financial Stability. •  A very active ambassador for macroprudential policy: José Viñals, Financial counselor and Director of the Monetary and Capital Markets Department of the IMF. •  A distinguished expert on the financial sector worldwide and its regulation: Douglas Elliott from the Brookings Institution. Thank you all for being with us today. As you know, for each issue of our FSR, we always try to pick topics that are both analytically complex and relevant to current policy-making. This is clearly the case with macroprudential policies. Indeed, macroprudential policy is a critical dimension of the public policy response to the crises we have experienced since 2008 and has figured prominently in the lessons we have drawn from them. Let me mention three of these lessons. BIS central bankers’ speeches  1  •  First, the oversight of individual components of the financial system is not enough to preserve financial stability. Having robust financial institutions is a prerequisite for ensuring financial stability but it is not in itself sufficient.
In this regard, I am pleased to say that Hong Kong has done reasonably well so far. Within a few years, Hong Kong has become the global hub for offshore RMB businesses, with the largest RMB liquidity pool and being the largest offshore RMB bond issuance and asset management centre in the world. As for the Belt and Road Strategy, Hong Kong as an IFC is uniquely well positioned to play a crucial role. However, since it is a new strategy aiming to cover markets that are less familiar to most of us, there will unlikely be too many “low hanging” fruits. Putting it bluntly, Hong Kong must work doubly hard to get into the game and stay ahead of the others. In this connection, the launch of the Infrastructure Financing Facilitation Office (IFFO) by the HKMA in early July is a concrete step to help Hong Kong capture the business opportunities that may lie ahead. This is only the beginning of a challenging process to build Hong Kong as the preferred platform for implementing the Belt and Road Strategy. Please rest assured that the HKMA stands ready to collaborate with the industry and the practitioners on this important mission. The first panel of today’s Summit will discuss Hong Kong’s value proposition in the Belt and Road Strategy, including the facilitating role to be played by IFFO. Technological advancement and financial services 10.

Given the lack of second round effects on inflation, these latter’s impact, as previewed, results to be a transitional one. Inflationary domestic pressures remain low, as showed by the core inflation performance of non-tradable goods. The rates of these important factors of inflation remain at 1.2 and 2.4 percent, respectively in April. This trend is expected to be observed even in the near future, as long the Albanian economy shall continue to be characterised by low rates of capacities utilisation, by a controlled expansion of monetary indicators and by the anchored inflationary expectations. Bank of Albania, to fulfil its target for inflation, has observed a cautious monetary policy, supplying the needed liquidity in the market, in line with economy needs. Financial markets are shown stable, by downward interest rates, low and dampen risk primes. Monetary developments during March have confirmed the uprising expansion of monetary supply in economy, which rose by 10.2% in annual nominal term. This performance is grounded by the drop of currency outside banks rate and the stable growth of deposits in the banking system. *** The Supervisory Council of the Bank of Albania, during its discussions concluded that inflationary pressures on the domestic economy are expected to be balanced over the medium term.
To cut a long story short, it was decided to introduce a new monetary framework in March 2001. An inflation target was set for the Central Bank and the króna was floated. By that time it had already fallen to the lower tolerance limit. The króna then depreciated further, driving up inflation which rose beyond 9% in January 2002. A rapid reduction in inflation followed, the target was attained by the end of the year and the policy interest rate was quickly lowered. Inflation remained below or close to target until the middle of 2004. Later that year, major investments were decided in the aluminium and power sectors. Shortly afterwards, sweeping structural changes in the housing mortgage market caused a surge in bank lending and domestic demand. The current account also deteriorated significantly. In the face of mounting inflationary pressures, the Central Bank steadily raised its policy rate (undiscounted yield) from 5.3% in spring 2004 to 14.25% at the end of last year, where it still remains. Higher interest rates caused the króna to appreciate and it ended up at a historical high, especially in late 2005. Following earlier comments to that effect in its Monetary Bulletin in December 2005, the Central Bank pointed out that the króna was at its strongest in real terms since 1988. One assumption in the inflation report presented then was that the exchange rate would remain unchanged over the forecast horizon. The Bank described this assumption as unlikely to hold.

The Bank’s capital was also boosted. The main rationale for increasing the reserves and capital was to strengthen the Bank in performing its functions in a much expanded financial sector, and to address comments from rating agencies and others about the Bank’s inadequate foreign liquidity relative to Iceland’s large foreign debts, which are overwhelmingly in the private sector. There was no other motive behind boosting the reserves and the Central Bank has underlined the importance of not creating moral hazard. Unease in the markets lasted until mid-2006, when it calmed down significantly. By then, the króna had depreciated by one-quarter and around mid-year the real exchange rate was close to the twentyfive-year average. In historical terms it was much more normal than in the second half of 2005, i.e. before the depreciation in the first half of last year. This is an important fact to bear in mind, i.e. that the króna depreciated from an unsustainable and far higher real exchange rate than was compatible with external balance of the economy. The change was actually normal and necessary, and formed part of the pressing external adjustment of the economy. Since the middle of last year, the króna has been fairly stable. It has fluctuated within a relatively narrow corridor which it has only moved beyond in a few exceptional cases. So far this year it has strengthened. Since the beginning of 2007 the nominal exchange rate has on average been 14% weaker than the average for the last quarter of 2005.
Should, for instance, financial stability be included as a new objective for monetary policy, together with price stability and macroeconomic stability? 5 Or can the objectives, as before, apply to price stability and macroeconomic stability but with consideration to financial stability included in the prospects for these two quantities in the slightly longer run? 6 Theoretically, there may thus be some differences between different ways of including consideration of financial stability in inflation-targeting. In practice, I do not think the differences are so large – regardless of the underlying reason, the results are in practice that monetary policy is slightly adjusted to counteract potential imbalances on the financial side of the economy. 7 It may be worth pointing this out: a monetary policy that “leans against the wind” in this way does not actually scrap the inflation target and swap it for a target for asset prices or indebtedness. The inflation target is still the foundation. What this means is that in some situations monetary policy can be adapted so that it takes slightly longer for inflation to get back to the target that it would have done otherwise if one had not taken financial stability into account. A necessary condition for being able to give such consideration is that confidence in the inflation target is firmly rooted and does not risk deteriorating because it takes somewhat longer for inflation to attain the target. A monetary policy that leans against the wind thus assumes that inflation expectations are firmly anchored around the target.

The risks of a setback in economic activity should not be underestimated either. As we Executive Board members pointed out, we are always prepared to make monetary policy even more expansionary if we assess that the upturn in inflation is threatened. But even if the focus of the debate in Sweden is now of necessity on current monetary policy, we must not lose sight of the longer perspective. There is a lively international debate on whether, and if so how, inflation targeting should be changed in the wake of the financial crisis and the ensuing period of a long-drawn out economic recession, very low inflation and very expansionary monetary policy. What do the past eight years mean for the functioning of the economy and for monetary policy? Will we return to the way things looked before the financial crisis? It is important that we also take time in the Swedish debate to focus on these fundamental issues so that the discussions of our own monetary policy framework remain well-informed and productive. This is important not least for the external evaluation of monetary policy in Sweden now being carried out on behalf of the Riksdag Committee on Finance. There are many interesting question that are worth raising. One example that is of immediate interest in the Swedish debate is the question of whether monetary policy should have an explicit target for employment in addition to the target for inflation. This is one question that will be taken up in the external evaluation.
When banks then significantly increase margins at the eleventh hour, as seen recently in commodity markets, clients then have to smell the coffee and scramble around to find the cash. And to be clear, those clients should not be expected to be able to find such sums at short notice. This is true in any market, not just commodities. Initial margins should be calibrated appropriately in peace time to reflect forward-looking risks. Archegos, nickel: these episodes left a few banks with bruises (some quite nasty) or just embarrassment, but not much more. However, the window for investment banks to finally learn counterparty risk management lessons properly is closing fast. And next time – in choppier waters – those who still haven’t may well not be able to get away with only a few bruises. It is important that these market and counterparty risk lessons are finally learned, especially for business lines that have grown on the back of the post-crisis macro environment – such as clientsupporting financing businesses in liquid products (in businesses such as prime brokerage and client clearing) as well as less liquid activities (for example structured equity autocallable note issuance; or Collateralised Loan Obligations, Asset Backed Securities and mortgage loan warehouses; or private credit markets). None of us have a crystal ball, but the waters we find ourselves swimming in are certainly more challenging already.

It is disappointing that lessons from the crisis on counterparty risk management were not properly learned. As we set out in our Dear CEO letter last year, Archegos is a prime example of this – a single client of many firms had built up risk concentrations that proved to be outsized. Some banks also got caught by this in the nickel market more recently. In other cases, we have seen groups of clients with similar risk exposures, whether that be large concentrated positions of their own or trades with banks that held such positions, which proved difficult to exit as market conditions and liquidity dynamics changed. Risk concentration should not only be assessed on a client by client basis, but across all clients combined. And most importantly, across the client’s market-wide portfolio, not just the portion held with a single firm itself. Whilst this information may not be readily available, the onus is on firms to demand of their clients the information they need to assess the risks they are exposed to. We also see some firms not adequately assessing the liquidity position of their counterparties. Look at the “Dash for Cash” in March 2020 or recent issues in the commodities markets. Whilst counterparties may be fully hedged against capital losses from sharp moves in asset prices, some have found difficulty in monetising their assets in order to meet margin calls.
Rodrigo Vergara: Chile’s March 2016 Monetary Policy Report Presentation by Mr Rodrigo Vergara, Governor of the Central Bank of Chile, of the Monetary Policy Report before the Finance Committee of the Honorable Senate of the Republic, Santiago de Chile, 28 March 2016. *  *  *  Accompanying figures and tables can be found at the end of the speech. Introduction Mr. President of the Senate’s Finance Commission, senator Andrés Zaldívar; senators members of this Commission, ladies and gentlemen, Thank you for your invitation to present the vision of the Board of the Central Bank of Chile on recent macroeconomic developments, its outlook and implications for monetary policy. This vision is contained in detail in our Monetary Policy Report of March 2016. Since our last Report saw the light December of last year, inflation has behaved as forecast. It has remained high, mainly due to the effects of the significant depreciation the peso has accumulated, in a context where indexation to past inflation and narrow capacity gaps have limited the decline of non-tradable inflation. Regarding activity, 2015 figures showed weaker demand and slower than expected growth towards the end of the year. As I will describe in a moment, this factor, along with an expected weakening of the external scenario, results in reduced growth prospects for this year. In our projection scenario, inflation is assumed to be slightly lower than we thought in December.

I do not see this as inconsistent with inflation targeting because it is the stability of inflation over long periods, not year to year changes, which is crucial to economic success. The key principles underlying flexible inflation targeting are credibility, predictability and transparency of decision-taking, and they will remain the cornerstone of successful monetary policy in the future. Conclusions Governor Leigh Pemberton’s 1992 lecture concluded with a message for the LSE: “in a world of price stability you might not think of inviting the Governor of the Bank of England to address you”. Had price stability guaranteed financial stability, and had I achieved my long-held ambition of being boring, that might have been true. Unfortunately, it is not how things have worked out! What I have tried to show tonight is that the case for price stability is as strong today as it was twenty years ago – both in theory and in practice. The clarity and simplicity of the inflation target helps to anchor inflation expectations on the target. We forget the lessons of the 1970s and 1980s at our peril. In the end, the essence of central banking is to maintain confidence in, and the value of, paper money. It is far too soon to bury inflation targeting. Together with central bank independence, it played a key role in bringing price stability to the UK.