samchain/econo-pairs-v1 huggingface dataset:
Errors and omissions in statistics can also be one reason why forecasts are based on incorrect assumptions. It is therefore also interesting to assess the central bank’s forecasts against those of other analysts. Would it have been possible to make better forecasts than those the central bank produced? In order to answer this question, it is necessary to keep a record of both the central bank’s forecasts and other analysts’ forecasts. Another important factor in an assessment is whether the monetary policy decisions are wellbalanced, given the forecasts and judgements that have been made. The way the strategy has been formulated is important in this context. However, an assessment does not need to stop here. It may of course be more comprehensive and cover not only target fulfilment, but also the monetary policy framework as a whole. Against this background, let me just say a few words about the monetary policy strategy we have chosen in Sweden and the changes we have recently made to our analysis framework. The strategy has of course developed gradually during the period we have applied inflation targeting and is primarily the result of practical experiences of inflation targeting in Sweden and in other countries. New findings in academic research in this field have also had significance. The Riksbank’s monetary policy strategy In Sweden, the Riksdag (the Swedish parliament) has delegated the responsibility for monetary policy to the Riksbank, through the Sveriges Riksbank Act, which came into force in 1999.

2  BIS Review 25/2006  We thus endeavour to attain the inflation target within a two-year time perspective, under normal circumstances. In certain cases, however, we may need to have even greater flexibility than the twoyear perspective allows. If the economy were to suffer very large supply shocks, for instance, in the form of structural changes that have a major effect on inflation, or if extreme situations such as war or natural disasters occur, the process of bringing inflation back to the target may need to take even longer to avoid excessive strain on the real economy. In this type of situation it would be even more important that there was confidence in the inflation target. However, flexibility must not be allowed to undermine the nominal anchor. If confidence were to fail, we would be forced to act more strongly and would not have the same possibility to consider the real economy. Thus, the objective of monetary policy is to maintain price stability. However, it is possible to give consideration to the development of the real economy. This does not mean having a target for growth or employment. Instead, this type of consideration is made possible by the way in which we have chosen to formulate the principles for attaining the inflation target. However, it assumes that there is sufficient confidence in the inflation-targeting policy.
8  BIS Review 126/2010  Figure 6 Stock market volatility (percent)  Long-term interest rates in developed economies (3) (percent)  120  120  6  6  100  100  5  5  80  80  4  4  60  60  3  3  40  40  2  2  20  20  1  1  0  0  0  0  07  08  09  10  Developed markets (1) Emerging markets (2)  05  06 U.S.  07  08 Japan  09  10 Eurozone  (1) Uses VIX volatility index. (2) Estimated volatility of the MSCI index in dollars. (3) 10-year government bond interest rates. Sources: Bloomberg and Morgan Stanley Capital International. Figure 7 Output gaps (*) (percent)  6  6  4  4  2  2  0  0  -2  -2  -4  -4  -6  08  09 June 2010 Report  10  11  -6  September 2010 Report  (*) Gray area shows forecast as from the third quarter of 2010. Source: Central Bank of Chile.

As has happened under different circumstances, any movements of the exchange rate away from the trend assumed as a working assumption is possible in a floating regime, and its potential effects on the financial system, output or employment will be considered by the Board as inputs for their future decisions. Summarizing, for the rest of this year, annual CPI inflation is expected to return to figures around 3% to then move to the upper limit of the tolerance range for some months. This short-term trajectory is influenced by one-time effects, which will eventually revert, permitting inflation to hover around 3% throughout 2011 and to the end of the relevant projection horizon, this time the third quarter of 2012. Y-o-y CPIX1 inflation will describe a more gradual convergence to 3%, largely because the shorter-term effects on inflation are concentrated in items outside the CPIX1. Private expectations are not very different from this (figure 10). The Board estimates that it will continue withdrawing the monetary stimulus at a pace that will depend on how domestic and external macroeconomic conditions unfold. This process of MPR normalization was begun in June and continued in the meetings of July and August – with increases of 50 basis points each time – taking the MPR to 2% y-o-y. Going forward, the market has internalized a process of withdrawal of the monetary stimulus in the coming quarters. This is consistent with the progressive normalization of credit conditions, which is visible in various markets and indicators.
In the eyes of many university students, banking remains a “traditional” industry focusing mainly on selling products and services, with opportunities limited to frontline jobs. That clearly is NOT THE CASE. So we urgently need to clear up such misunderstanding. And we should better connect the young generation with the industry, so that they can form a more accurate idea of what modern banking is about. And they need to get ready at an early stage for the career opportunities in the new era of modern banking, particularly because some specialist portfolios will take years to cultivate the relevant skillsets. 22. With that in mind, we just announced a brand new Banking Graduate Trainee Programme which aims to draw in new blood for the banking industry in a more systematic and targeted manner. Thanks to the strong support of the industry, about 30 participating banks will provide more than 120 entry-level job opportunities focusing on the three fastest growing areas, namely Fintech, Green and Sustainable Finance, as well as the Greater Bay Area business opportunities. The first intake under this Banking Graduate Trainee Programme will commence in September this year. 23. At the same time, we will continue our outreach and promotional efforts to provide students with an up-to-date picture of modern banking.

The agreement for a minimum corporate tax rate for multinational enterprises, spurred by the G20 with the OECD’s invaluable support and ratified by more than 130 countries that account for more the 90% of world GDP, is a good example of the benefits that international cooperation can generate in the digital era. Furthermore, supply issues, which have led to shortages and strains on prices during both the pandemic and now the war in Ukraine, strengthen the case for boosting international cooperation. In its latest World Economic Outlook, the International Monetary Fund concluded that these supply issues should not lead us to lessen our economic openness. On the contrary, its analyses point to the international diversification of imports and improved substitutability of the sources of inputs from different countries to boost value chains’ resilience. Signing new bilateral and multilateral trade agreements and strengthening pre-existing ones, which would afford greater certainty to trade relations while reducing their cost, would also help attain this goal. To conclude, I believe that, by sharing experiences and outlooks, fora such as this one help gain a deeper understanding of the challenges that we, the economic and monetary authorities, must face. I hope that you are able to benefit fully from the discussions held over the coming days and wish you a pleasant stay in Seville. 2
While Global R* affects the level around which equilibrium real interest rates fluctuate over the  Page 4  longer term, it abstracts from the shorter-term cyclical forces at play. So let me be very clear that nothing I say today is intended to be a signal about the near term path of the equilibrium real interest rate in the United Kingdom or indeed Bank Rate over the MPC’s policy horizon. Even if the trend global real rate remains low, we may still see a rise in nominal policy rates and equilibrium real interest rates in the short to medium term. In other words, Global R* is an important underpinning, but it is not a useful guide to real-time policymaking. Since real interest rates are an important determinant of investment, in today’s speech I will also consider the extent to which investment has responded to movements in the trend real rate. As I will discuss in more detail later, the determinants of, and prospects for, investment have important implications for another equilibrium concept that helps us to understand the policy landscape: potential output, which is the hypothetical level of output that could be produced if all resources were fully employed. Global R* To illustrate the context, Chart 1 shows the UK ten-year real interest rate, measured directly from index-linked bond prices, plotted to the end of June of this year. Two things stand out immediately.

This has taken place in a global environment in which the world economies and financial systems are increasingly becoming more integrated. As a result, it can be expected that there is increased interdependence, events that take place in one part of the world will have implications on other parts of the world. This is likely to be more pronounced in the ASEAN economies and financial systems, given their openness and their high degree of integration with the global economy and international financial system. As the ASEAN and the EU continues to evolve as strategic partners, new opportunities can also be realized. An enhanced relationship will also contribute towards more effective management of the new challenges in the ever-changing global environment. Indeed, this Conference takes place at an important time when it becomes even more constructive and meaningful for our two regions to strengthen our associations, our inter-linkages and our relationships. Learning from the experiences of the EU Ladies and Gentlemen, The unification of Europe on many fronts is a major structural enhancement to the global economic and financial landscape. It is very likely however, that in view of our diversity and different structures and stages of development, the route for the integration process will be significantly different. It can be stated with certainty however, that integration will nevertheless occur. Indeed, the process has already commenced and it is likely to gain momentum as we advance forward. The motivation being the greater stability it brings and the increased growth potential it generates.
Better resolution tools, which would be needed if CoCos are not enough, can lessen the dilemma and are an essential part of the reform programme. They give the authorities extra options such as creditor bail-in through write-downs or debt-for-equity conversions. They provide a statutory backstop, enabling bail-in of private sector creditors. As such, they are a necessary ingredient for restoring market discipline. CoCos buttress market discipline and help lift the authorities from the horns of the timeconsistency dilemma. They augment regulatory discretion at the point of distress with contractual rules well ahead of distress. Capital replenishment is contractual and automatic; it is written and priced ex-ante and delivered without temptation ex-post. Because intervention would be prompt, transparent and rule-based, the scope for regulatory discretion would be constrained. For that reason, the time-consistency problem ought to be reduced, perhaps materially. A contractual belt is added to the resolution braces. To achieve these benefits, change would be needed to banks’ capital structure. But this reconfiguration would not be especially dramatic. Indeed, it would be as simple as CDE: C(oCos) + D(debt) + E(quity). The layer of bank equity would be augmented with a layer of CoCos, with slices defined by market-based triggers. Banks’ capital would comprise multisliced equity, some actual, some contingent. In some respects, this model is not greatly dissimilar to the one recently proposed by the Swiss banking commission.14 In achieving this capital structure, one option would be for regulators to require it, as in Switzerland.

Ladies and Gentlemen, In this context, from an emerging market perspective, the question, therefore, goes way beyond just how to cope with the current turmoil, but reaches deep down into the direction of market development over the medium to longer term as well. Within the realm of central banks, for example, the traditional science of monetary policy has so far been based on the idea that the central bank’s objective should be to maximize the economic well-being of the people in the country by minimizing the deviations of inflation from its optimal rate and the deviations of real economic activity from its so-called natural growth path. However, today it is clear that the central bank’s role in fostering financial stability is essential and this role will become more prominent in the world of increasing financial integration. Experiences of the recent crises indicate that monitoring financial imbalances is crucial in preventing financial turmoil from occurring. It has long been recognized that a weak financial system undermines the efficacy of monetary policy measures and can overburden the monetary authorities. For this reason, it may be desirable for prudential policy frameworks to be strengthened, thereby addressing the build-up and unwinding of the imbalances more effectively. In this context, the Bank of Thailand has also monitored seven areas of financial imbalances, including those in the financial market, real estate, household and corporate sectors on a regular basis.
Corporate bankruptcy law grew up as it became clear that market forces delivered losers as well as winners and that some orderly means was needed of dealing with the losers. In this way, bankruptcy law supports the market mechanism. The situation is no different in a sovereign context. A well-articulated framework for dealing with sovereign liquidity problems should reduce the inefficiencies and inequities of the current unstructured approach to standstills. It would support the international capital market mechanism. It would be no  7  BIS Review 70/2000  more likely to induce debtors to default than bankruptcy law is to induce corporate debtors to default. In neither case is default a soft option. We would of course hope and expect sovereign standstills to be the exception rather than the rule. But it is better to plan for all contingencies, and to articulate these plans, than have international public policy made on the hoof. In this respect, crisis-fighting shares many similarities with fire-fighting. Fire-prevention is ideal, but will never entirely prevent fires occurring. So it makes sense to have a fire-fighting plan, which everyone understands and abides by, to minimise the damage when fires do occur. Would standstills work? The issue of whether standstills should form a part of the official sector’s toolkit of responses remains under active debate. A number of arguments against the use of standstills have been made by policymakers, academics and the private sector. Let me try and articulate some of the concerns.

This recognition that it is neither practical nor desirable to see the IMF in a role of Lender of Last Resort has prompted considerable thinking about the nature of private sector involvement in crisis resolution and the modalities of sovereign payments suspensions or standstills. Payments suspensions are in some ways the obverse of recognising the limits on IMF lending. And, reflecting this, sovereign standstills litter history over the last two centuries: in Latin America in the 1820s; among the US states in the 1830s and 1840s; in Latin America again in the 1870s; among the majority of sovereign debtors in the 1930s; and in Latin America once again in the 1980s. All too often in the past, however, sovereign standstills have also been a recipe for chaos and confusion. The recent sovereign defaults in Russia, Indonesia and Ecuador are good cases in point. But looking back over history, it is clear that messy and protracted sovereign standstills are very much the rule rather than the exception. Historical experience with sovereign standstills probably looks quite a lot like corporate experience before insolvency rules were put in place, with the work-out process inefficient and inequitable. I will return to that corporate bankruptcy analogy later on. Against this backdrop, the key issues facing the official community seem to me to be twofold.
Working towards promoting equitable and inclusive growth is necessary for the long-term sustainability of ASEAN. The industry should explore these less penetrated markets through new strategies and strengthened capabilities. Nonetheless, expecting markets to effectively provide for the needs of the underserved may be challenging. Markets, driven by financial motives have a tendency to end up instead widening the disparities in income, equality and socio-economic protection. Intervention or even redistribution becomes a necessary tool to correct this, rebalance societal fortunes to enable the economically worst off to benefit and be co-opted back into the mainstream, as part of an overall social agenda that promotes inclusion and cohesiveness. This goal, of inclusion and cohesiveness, may well be a prerequisite to truly maximising society’s economic potential. Consistent with this is another key initiative in Malaysia that targets the underserved. This is the new insurance scheme for the Bottom 40% households. Supported by pioneering contributions from foreign insurers, a fund will be set up to provide insurance cover for those eligible. They will receive income support if they are diagnosed with critical illnesses or hospitalised. This policy intervention attempts to resolve the market’s inability to provide such protection. Perception out there has been that this segment of the population is uninsurable, or from the perspective of insurers, too risky and likely unprofitable. We are taking a view that this is misplaced, and it will take proof to change this. Currently, we are still finalising the details and targeting the scheme to be fully operational in early 2019.

And from the end of March this year, the majority of new GBP Libor business should have ceased, further shifting demand to those increasingly deep and liquid risk-free rate markets. New sterling floating rate note issuance has almost exclusively referenced SONIA for some time. In the sterling swap market, the share of SONIA-referencing swaps has regularly dominated the Libor equivalent for 10 months now[1], with continued progress since the ‘SONIA-first’ interdealer quoting convention switch last year. [2] Indeed, the dealer to dealer market has completed a transformation in risk traded with SONIA in excess of 70% vs. Libor, with progress across all tenors. If we remove the direct market element and focus on pure inter dealer market, we estimate this is now in excess of 90% SONIA. [3] These positive developments in linear derivatives (e.g. interest rate swaps) have filtered through into more complex derivative markets, with SONIA swaptions, caps and floors widely available and infrastructure being put in place to support these products. Today is a further landmark, with another ‘SONIA first’ initiative as the interdealer market looks to shift liquidity in these more complex non-linear products from Libor to SONIA ahead of the upcoming end-Q2 milestone to cease new Libor linked issuance. [4] This is not to say there is an outright ban on trading Libor in nonlinear sterling markets after this milestone.
In the last decade or so, the shocks have been larger and the variance of inflation in a number of countries has at times increased, but with a tendency to undershoot. This has been less marked for the UK, but here still we currently face a period of below target inflation. And, as discussed previously, we have moved into a period of inflation targeting in the face of much larger shocks. To be clear, this does not for a moment call into question the benefits of targeting inflation. Indeed, it is notable that over the same period inflation expectations in the UK have not become de-anchored or more volatile, despite the greater economic volatility. But this shift has required central banks to be somewhat more flexible in the way we go about seeking to hit the inflation target, and the tools we use to do this. This is apparent in a number of approaches used by central banks: the adoption of an averaging over time mechanism to calculate the relevant inflation target, thereby allowing some catch-up to account for past inflation shortfalls; allowing inflation to return to target over a longer period of time where there is a trade-off of weaker activity and above target inflation; or using forward guidance such as the MPC is at present in the face of very great uncertainty, so that we make clear that we will need strong evidence that inflation is likely to return sustainably to target before policy should be tightened.

Independent pursuit of an inflation target does not mean that monetary policy is uncorrelated with other macro policies, including fiscal policy. Indeed in the current circumstances there are mutually reinforcing effects from monetary and fiscal expansions. The consistency of the response of monetary and fiscal policy is something that the IMF has emphasised and recognised in its assessment of UK policy. But that does not mean independence has been abandoned. The interventions we have made are effective because the Bank is independent, and because we will reverse these actions when conditions require that. A fallacy of so-called Modern Monetary Theory is that it believes monetary policy can be used without the credibility of independence and thus without the assurance that price stability will be maintained. Of course, the real test of this may come when we reach the point at which policy needs to be tightened. Actions will speak louder than words. But the great value of central bank independence – and the reason why it is rightly regarded so highly – is because it is a regime that provides the most powerful set of incentives possible, to do the right thing when that time does come. We are 2/3  BIS central bankers' speeches  individually accountable and collectively responsible to Parliament for acting, without fear and favour, to hit the inflation target. Not to do so, as well as being in breach of our statutory duties, would also be found out almost immediately by financial markets. Inflation expectations would become de-anchored.