samchain/econo-pairs-v1 huggingface dataset:
These fundamentally conflicting objectives provoked many currency crises and caused tremendous economic harm and, as a result, heightened people’s desire for monetary stability. Today, the public’s aversion to, and politicians’ awareness of, inflation may have reached a peak in the developed world. This was certainly a necessary condition for the global disinflation process of the 1990s. Historically, the most effective device for keeping the price level down was the gold standard.2 In the US, for example, accumulated inflation between the founding year (1776) and World War II was just 1  The majority of European central banks were established in the 19th century. The rise of central banking accelerated in the 20th century. 2  However, the long-run stability of the price level was accompanied by strong and recurring fluctuations in output and prices. 1  BIS Review 35/2000  30%, whereas since then, the price level has multiplied by factor 8. The figures for Europe look broadly similar when the war-driven hyperinflations are left out of account. This makes central banks’ seemingly unique policy performance in the nineties look slightly more modest. In the past decade, three main factors facilitated a return to purchasing power stability. First, a lesson was learned from the negative experience with inflation. Price stability gained considerably in importance in the political process. Majorities in both governments and parliaments voted in favour of monetary discipline, which in many places amounted to priority being given to budget discipline and pronounced central bank autonomy.

This is as good a time as any to remind everyone that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee or others in the Federal Reserve System. The Economic Outlook If you do an online search about recent economic developments, the word “uncertainty” will come up a lot. And it’s true that uncertainty, both at home and abroad, is playing an important role in my thinking about the economic outlook and monetary policy, as I’ll discuss shortly. But when you take a step back and look at where things stand today relative to our goals, the economy is in a favorable place. The current expansion is the longest on record. The economy continues to grow at a moderate pace, as seen in the latest GDP numbers. And this growth has supported month after month of job gains and a pickup in wage growth in the past couple of years. Furthermore, the overall unemployment rate is near the lowest it has been in 50 years. And the benefits of the strong labor market have been broad across the population: Unemployment rates for African-Americans and Hispanics, while still higher than the overall rate, are near their all-time lows. These low rates aren’t just a fluke of how unemployment is measured in the official statistics—the broadest measure of underemployment, called U-6, is at its lowest level since 2000. These are all very positive signs when it comes to assessing our maximum employment goal.
However, Figure 4 shows that the difference between these rates and the Riksbank's policy rate does not appear to have been affected by the asset purchases.14 Government bond purchases thus appear to have pushed down the interest rate on government bonds to a certain limit. However, there are no signs that this caused households and companies to encounter lower interest rates. It is therefore very unclear whether the result was that the economy was stimulated via the interest rate channel.15  13 The market is dominated by so-called FRN-bonds, where the coupon follows STIBOR 3 months. 14 Erikson and Vestin (2021) show a similar figure. Some larger companies also finance themselves through the  bond market. However, when the Riksbank began purchasing government bonds, this form of financing was fairly unusual and accounted for only 22 per cent of the companies' total borrowing (see the Riksbank, 2014). Moreover, it is common for companies' bond loans to have variable interest rates. As turnover in the market is small, it is difficult to follow price developments. Nevertheless, the statistics indicate that rates on corporate bonds fell less than those on government bonds in 2015 and 2016. 15 However, the lower interest rates could reasonably contribute to a lower central government borrowing cost, something I will return to in a moment. However, this was not the purpose of the Riksbank's purchases. 7 [30]  Figure 4. Lending rates have followed the policy rate Per cent  Note.

The financial results accumulated over time are therefore not quite as negative as indicated by the change in value this year.32 Table 2 and Table 3 show the accumulated financial results broken down by the different phases of the purchase programme and the different assets purchased.33 Table 2. Financial result of the Riksbank's purchases in the various phases Phase 1 (decisions 2015-2019) −5 Phase 2a (decisions March 2020 – June 2020) −24 Phase 2b (decisions November 2020 – June 2022) −19 Total −47 Note. SEK billion. Refers to total results since the start of the purchases and is based on market valuation on 30 November 2022. Most of the losses that now occur can be linked to purchases during and after the pandemic (phase 2). Government bonds have fallen more in value than covered bonds this year, despite the fact that the holdings were about the same at the beginning of the year. This is because government bonds, especially those purchased in phase 2, have a longer maturity and are therefore more sensitive to changes in interest rates. Otherwise, the losses in Table 3 reflect approximately the proportion of our holdings accounted for by each asset class. Table 3. Financial results of the Riksbank's purchases of different asset types Government bonds −20 Municipal bonds −6 Covered bonds −21 Corporate bonds 0 Total −47 Note. SEK billion. Refers to total results since the start of the purchases and is based on market valuation on 30 November 2022.
The inflation target is worded as the annual CPI inflation being two per cent, with a tolerated deviation interval of plus/minus one percentage point. Monetary policy shall thus be conducted to ensure that the purchasing power of the krona remains stable with regard to the basket of goods bought by the average Swedish household. Low inflation is important for many reasons. When a central bank’s target is to avoid high inflation and large fluctuations in the rate of price increase, it also contributes to stabilising economic activity. Practically all of the industrial nations that have changed over to an inflation target of the type we have in Sweden have seen a reduction in variations in inflation. When a central bank stabilises the rate of price increase, it can also contribute to reducing the risk of financial crises, which is especially important because bank crises, as the experiences of for example Sweden, Finland Norway and Japan show, are often linked to a rise in unemployment and a prolonged period of poor growth. Sweden’s experiences of inflation targeting are positive. Growth in the Swedish economy has been at an average of 3.0 per cent a year since 1994, while inflation has been low over several years. At the same time, open unemployment has declined from around 8 per cent in 1993 to less than 4 per cent in 2002.

Both production and investment are determined by fundamental factors such as demography, households’ preferences and institutions, as well as regulatory systems. These factors in turn determine the development of production factors such as labour, capital and production techniques. The long-term sustainable growth rate is also very important to households’ and companies’ expectations of future growth in income and profits. Willingness to consume and to produce - both supply and demand - are in the long term determined by the same fundamental factors. It is reasonable to assume that the variations in factors such as demography and institutional conditions are relatively limited in the short term. However, demography is likely to become a constraint on economic growth to an increasing extent throughout Europe. Deviations between actual and potential production can arise. When consumption or production exceeds the long-term sustainable growth rate, the level of resource utilisation rises, which may exert inflationary pressure in the economy. The fact that deviations can arise between actual and potential production is due to a number of slowmoving factors in the economy. Market imperfections, such as a lack of competition and transaction costs make both prices and production factors slow-moving, and mean that it takes time for actual production and consumption to adapt to changes in supply and demand in the economy. When adapting to changes in the fundamentals that determine growth or to disturbances, the rate of price increase often increases or declines during a period of time.
And if it happens again we will again risk destabilising international financial crises. From the other side, in the absence of mutual trust, there will be increasing pressure to break up the global capital market. Regulators and supervisors who cannot trust the implementation of standards in other jurisdictions will defend stability in their own jurisdictions by raising barriers. Ring-fencing of capital and liquidity, non-recognition of foreign firms, restrictions on activities and extra territorial rules are just some examples of what can happen. Such action minimises the risk of international crises. But the cost is the rolling back of financial globalisation with less effective and efficient intermediation of global savings. So without mutual trust, the danger is either slipping back into weak regulation and supervision and regulatory arbitrage risking further crises or fragmentation of the international financial sector – a rolling back of financial globalisation that will damage global growth. Mutual trust will not be easily achieved. It will require more than hope and faith in our fellow man. Perhaps one day it can be founded on international law and treaty. Until then, however, it has to be built on the institutions and machinery established by those initial G20 meetings in Washington, London and Pittsburgh in 2008 and 2009. And in particular, on the work by the Financial Stability Board and the IMF. 6  BIS central bankers’ speeches  The Financial Stability Board has already established peer review mechanisms to assess implementation in its members.

Finally, there was an emerging recognition of the potential for conflict between the central bank’s necessary concern with systemic financial stability (you cannot hope to deliver monetary stability if the financial system is crashing about your ears, while monetary stability is itself a primary condition for financial stability) and consumer or depositor protection, which if carried too far can itself undermine the strength of the financial system. These profound changes in underlying philosophy - which, as I say, spread across much of the political spectrum - were in our case fundamentally important in opening the way to a more clearly defined and distinctive role for the Bank of England and a necessary condition, in my view, for the delegation by the Government to the Bank of greater independent, technical, responsibility. Even so, although those changes were a necessary condition, they were not in themselves sufficient, and greater independence did not come all at once. As often happens, sadly, a big step forward came after a major setback. In 1992 after we had been driven unceremoniously out of the European Exchange Rate Mechanism (following the boom and bust of the late 1980s / early 1990s), the Government of the day adopted an explicit inflation target as the nominal anchor for monetary policy. Interest rate decisions in pursuit of that target remained with the Chancellor of the Exchequer after consultation with myself as Governor and my senior monetary policy experts at the Bank. But the really novel feature of the new arrangements was their transparency.
It was therefore sometimes perceived as unclear which expectations we meant when we commented on whether market expectations were reasonable. This gave rise to some criticism for unclear communication in 2005 and 2006. Using our own forecast for the repo rate removes the risk of being misunderstood for this reason. Experiences so far of our own interest rate path My impression is that the comments on the new system of publishing our own path for the repo rate have largely been positive, although there has also been some criticism. With regard to our concrete forecasts for the repo rate, the discussion has become livelier and we have heard more criticism. On the two occasions so far when we have presented a new assessment the monetary policy decision to raise the interest rate to 0.25 percentage points has indeed been anticipated and hardly been questioned. But our forecasts regarding future developments have surprised some market agents. 2  BIS Review 112/2007  The Riksbank’s forecast was a surprise in February The path for the repo rate that we presented in February was lower than the expectations that could be detected in the market pricing at that time. It was also lower than the average of the interest rate forecasts made by other forecasters. However, there were considerable differences between the different market analysts. Some had views relatively close to ours, while others differed substantially.

A higher repo rate with then be needed in order to keep inflation close to the target. Conclusion Today I have spoken about the situation in Sweden and abroad: partly about our dependence on events abroad and partly about what we ourselves can do to smooth the course of development in the Swedish economy. I have previously described the crisis in the early 1990s like this: “Things were quite OK abroad, but Sweden was not OK”. At the time of the crisis in 2008 the situation was the opposite: “Things were not OK abroad, but Sweden was OK”. Recent developments abroad have been marked by great uncertainty. Sweden is highly affected by this uncertainty. With the help of monetary policy we can do all that we can to promote a stable development of the Swedish economy: that is ensure that inflation stays close to the target and that the development of the real economy is as stable as possible.
In closing, I want to leave you with the powerful words of Mia Mottley, the Prime Minister of Barbados, from her opening remarks at the UN COP26. She said, "If our existence is to mean anything, then we must act in the interest of all our people who are dependent on us." The heart-wrenching story of a grieving grandmother collecting the bodies of her daughter's family of 4 in the Batang Kali tragedy is a stark reminder that climate change is escalating, and its impact is striking closer and closer to home. This tragic reality demands our swift and decisive action to mitigate its devastating impact and ensure no Malaysian gets left behind in the transition towards a low-carbon economy. On that note, I wish all of you fruitful discussion in the sessions ahead and I look forward to tangible outcomes from these discussions. 1 Impact Assessment Report: Coastal Climate Resilience Infrastructure Project  (CCRIP). [Source] 2 The previous roads mentioned were merely dirt roads that became unusable during  heavy rains and cyclones, indicating a lack of advanced construction techniques. The issues primarily arise from improper design, construction techniques, and the use of weak materials that are unable to withstand cyclonic conditions. In the case study, the roads described are specifically engineered using materials capable of withstanding frequent submersion in salty or brackish water. These roads are built at higher elevations with broader and more elevated shoulders, while also incorporating culverts and water gates to effectively manage floodwater.

Additionally, where suitable, vetiver grass is utilised to reinforce road slopes and prevent erosion. The term "climate-resilient" is used to describe these roads, emphasising their ability to withstand environmental challenges without employing other technical jargon. 3 Water Revolving Fund in the Philippines. [Source] 4 Melaka State Climate Action Plan 2020-2030. [Source] 5 ADB Technical Assistance Report. [Source]  3/3  BIS - Central bankers' speeches
Compared with the June 2022 Eurosystem staff Broad Macroeconomic Projection Exercise, headline inflation has been substantially revised up in September by 1,3 percentage points to 8,1 percent for 2022, by 2 percentage points to 5,5 percent for 2023 and by 0,2 percentage points to 2,3 percent for 2024. Energy price inflation remained extremely elevated, at 38.3 per cent, and it was again the dominant component of overall inflation. Market-based indicators suggest that, in the near term, oil prices are likely to moderate, while wholesale gas prices will stay extraordinarily high. The relatively high import share of gas needed for the EU27 energy consumption will create extensive challenges in the winter months of 2023, especially in countries with gas-intensive industrial sectors. In fact, the recent Purchasing Managers' Indices (PMIs) in the manufacturing sector have dropped notably. Food price inflation also rose in August, to 10.6 per cent, reflecting higher input costs related to energy, disruptions of trade in food commodities and adverse weather conditions. While supply bottlenecks have been easing, these continue to gradually feedthrough to consumer prices and are putting upward pressure on inflation, as is recovering demand in the services sector. The depreciation of the euro has also contributed to the rising inflationary pressures, together with the aforementioned supply and demand factors. Governing Council latest meeting decision Against this background, in our latest meeting last Thursday, the Governing Council of the ECB decided to raise the three key ECB interest rates by 75 basis points.

In addition, thanks to the solid solvency buffers and the support of the Central Bank of Cyprus that relaxed temporally the capital and loan origination requirements, the banking system has supported the domestic economy by providing fresh lines of credit from January 2020 to June 2022 of 8,1 billion Euros. 2,6b euros have been granted to households for mortgages, whilst 1,6 billions and 0,6 billions have been granted to the Wholesale and Hotel Industries which have been affected severely by the pandemic. Nevertheless, all the banks need to remain cautious, prudent and active in order to confront a challenging period that lies ahead us. Whilst the first round effects from the geopolitical crisis has been up until now manageable, the second round effects have  5/6  BIS - Central bankers' speeches  not yet materialised and uncertainty in an environment with high inflation and weakened growth prospects is elevated. Adverse macroeconomic developments may deteriorate banks' profitability and asset quality, causing delinquencies and an upward trend in impairments and provisions. Interest rate normalisation policies may support the banks' revenue capacity through higher yields. However, they might fall short to balance out the structural deficiencies that would be magnified if the economic prospects follow an adverse route. It is therefore of pivotal importance for banks to adapt their business strategies to the new realities forged by the consecutive crises. And this would not be an easy ride as challenges emerge, often in unpredictable ways.
The difficulty is increased by the “neutral” real interest rate changing, for instance when the productivity growth in the economy changes. On the basis of experience, simple rules of thumb and rough calculations, everyone can per se obtain an idea of how monetary policy operates. However, this is another area that needs to be developed. Altogether, this review shows that monetary policy decisions can never be made mechanically with the aid of simple rules of thumb. In order to firm up the analysis and make it easier to describe the basis for our decisions, it is notwithstanding this important to describe and keep to a conceptual framework, around which we construct our analysis. As we gain increased knowledge, our analysis and conceptual framework are complemented or modified. In order not to lose clarity, we endeavour in our inflation reports, speeches and publications to describe our analytical apparatus and its development. Challenges in the present situation The growth prospects for the Swedish economy have improved considerably in recent years. The Riksbank has been successful in creating support for and making the inflation target credible, central government finances have improved and many structural reforms have been carried out, although much remains to be done. However, although for the most part, it looks good, there is a risk that the Swedish economy is now growing too rapidly due to over-optimistic assessments of growth prospects. This must in my view be taken into consideration in the conduct of monetary policy.

Given the cross-border nature of MMFs, it is important we work together internationally to ensure that we are aligned in our objectives, and adhering to common principles, even if the precise implementation varies a little to reflect the specific nature of each jurisdiction’s markets. The dash for cash provided an unwelcome reminder that the post financial crisis did not finish the job and left a dangerous gap in our exposure to the risk of financial instability. We must finish the task this time. Thank you. I am grateful to Imane Bakkar, Adam Brinley-Codd, Alice Carr, Geoff Coppins, Edward Denbee, Steven Dodkins, Lee Foulger, Karen Jude, Clare Macallan, Nick McLaren, Jon Relleen and Konstantin Wiemer for their assistance in helping me prepare these remarks. 1 The International Accounting Standard 7Opens in a new window defines cash equivalents as “short-term, highly  liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value”. 6/6  BIS central bankers' speeches