samchain/econo-pairs-v1 huggingface dataset:
The chart shows that Norges Bank’s changes in the key rate have less impact on money market rates now than earlier. In recent years, there has been an international trend towards increased focus on the need for monetary policy transparency. Under the auspices of the IMF and others the "Code of Good Practices on Transparency in Monetary and Financial Policies" was drawn up, which emphasises the importance of clarity, transparency and evaluation in monetary policy. This view of transparency and predictability contrasts sharply with the earlier practice of playing on the element of surprise. In monetary policy, this was associated especially with control of the exchange rate. In many countries, this approach was met with deteriorating credibility and high premiums for uncertainty. The effects of changes in monetary policy instruments became increasingly uncertain. Nevertheless, the consideration of predictability must not overshadow Norges Bank's obligation to set the interest rate at the level deemed appropriate by the Bank. The expectations of other economic agents must not control the setting of interest rates. There are a number of examples from countries with "transparent" monetary policies where interest rate changes have come as a surprise. This may  10  BIS Review 74/2001  be partly due to the fact that the central bank had a different view of the outlook for economic developments. Norges Bank has sought to promote transparency, for example by publishing our interpretation of the mandate for monetary policy and our assessment of the implementation of monetary policy.

Should any significant deviations between actual inflation and the monetary policy target occur, the Bank will provide an assessment of the reasons for this. 2  BIS Review 74/2001  Even though there was confidence in the implementation of monetary policy prior to the change in regulation, the communication of Norwegian monetary policy was clearly facilitated by the Government quantifying an inflation target. However, in our view the most important aspect of the shift to an inflation target is that political authorities clearly recognise that low inflation is a benefit in itself. History has shown that high inflation does not lead to sustained higher economic growth or lower unemployment. This recognition and the positive inflation track record in Norway since 1990 provide the Bank with a sound basis for conducting monetary policy. Implementation  In the light of the orientation of monetary policy in recent years, the new guidelines have been applied without any significant change in the conduct of monetary policy. The key rate is set on the basis of an overall assessment of the inflation outlook. Higher interest rates curb demand for goods and services and reduce inflation. Lower interest rates have the opposite effect. If evidence suggests that inflation will be higher than 2½ per cent with unchanged interest rates, the interest rate will be increased. If it appears that inflation will be lower than 2½ per cent with unchanged interest rates, the interest rate will be reduced. There is symmetry here.
•  All the major mobile wallets – Apple Pay, Android Pay, Samsung Pay – are available in Singapore. •  They can be used at any merchant that accepts contactless Visa, MasterCard, or American Express payments. Our banks have been active in payments innovation, with several home grown mobile payments apps. •  DBS has PayLah! and Standard Chartered has Dash. •  These pioneering apps allow users to easily pay friends and businesses that use the same app. •  And the newer apps can do even more. –  OCBC’s Pay Anyone allows customers to send money to friends in Singapore, using only their mobile number, Facebook ID, or email address. –  UOB has created UOB Mighty, an all-in-one mobile banking app and wallet similar to Android Pay. But the rest of the world has not been standing still. China, for instance, has been a hotbed for payments innovation. BIS central bankers’ speeches  1  •  WeChat integrates social media and payments to let users make seamless peer-topeer payments, shop online, and even pay at physical merchants. •  These solutions have made themselves an indispensable part of their users’ daily lives. So, while there has been quite a bit of payments innovation in Singapore, our payments experience needs to be as good as the best we see globally. Our vision is to make Singapore an electronic payments society.

A society: •  that spurs continuous innovation in payments technology;  •  that gives consumers maximum convenience and confidence in making payments;  •  that enables firms to increase productivity through payments integrated with business processes; and  •  where swift, simple, and secure payments is a reality for everyone. MAS has been working closely with the financial industry and other government agencies to drive electronic payments. We have also engaged KPMG Advisory to study Singapore’s payments landscape; KPMG’s report will be released later today. Let me elaborate on the four key strategies to create an e-payments society: •  streamlined regulation;  •  inclusive governance;  •  interoperable infrastructure; and  •  pervasive digitisation. Streamlined regulation – targeted, activity based, risk appropriate First, we will streamline our regulatory framework for payments; strengthen consumer protection; and make regulation more targeted based on the specific payment activities that businesses undertake. The existing regulatory framework for payments cuts across the Money-Changing and Remittance Businesses Act (“MCRBA”) and the Payment Systems (Oversight) Act (“PS(O)A”). The MCRBA was introduced in 1979, an era when bricks-and-mortar money changers and remittance agents were the norm. •  For more than three decades, it has served us well. •  We have a thriving remittance industry that provides an essential service to residents, including the many foreign workers in Singapore. The PS(O)A was enacted in 2006, with the objective of keeping our key payment systems safe and efficient.
The second risk is the long-term fiscal position of the United States. Recognizing that fiscal policy is the domain of the executive and legislative branches rather than the Federal Reserve, I would emphasize several points. For one, the current U.S. fiscal position is far worse than it was at the end of the last business cycle. For example, in fiscal year 2007, the budget deficit was 1.1 percent of GDP; in fiscal 2017, it was 3.5 percent of GDP. Similarly, federal debt held by the public was 35 percent of GDP in fiscal 2007, and 77 percent in fiscal 2017. Additionally, three factors will undoubtedly cause these budgetary pressures to intensify over time: the tax legislation will push up the federal deficit and federal debt burden; debt service costs will rise as interest rates normalize; and entitlement outlays will increase as the baby boom generation retires. Let me discuss each of these in turn. With respect to the tax legislation, the Joint Committee on Taxation estimates the cost at around $ trillion over the next 10 years.9 This estimate takes into consideration the likelihood that the legislation will boost the productive capacity of the U.S. economy somewhat—raising the economy’s potential growth rate—and that this incremental growth will generate additional tax revenues. To me, this seems like a reasonable estimate, recognizing that with any complex tax legislation, there is a high level of uncertainty about its impact on longer-term growth and revenues.

While this does not seem to be a great concern to market participants today, the current fiscal path is unsustainable. In the long run, ignoring the budget math risks driving up longer-term interest rates, crowding out private sector investment and diminishing the country’s creditworthiness. These dynamics could counteract any favorable direct effects the tax package might have on capital spending and potential output. Favorable near-term outlook Turning to the near-term outlook, the prospects appear favorable for another year of above-trend growth. Consumer spending should continue to grow at a moderate pace, supported by solid fundamentals. Household income is being bolstered by faster compensation growth and continued healthy employment gains. Moreover, the aggregate household balance sheet remains in good shape, due in part to rising home prices, a strong stock market, and only moderate growth in household debt. Over the past year, home prices have risen by about 7 percent on a national basis, and the S&P 500 equity index has risen by nearly 20 percent. In contrast, household debt has risen about 4 percent over the past year, only slightly higher than the growth in personal income. Further, the household debt service burden is low, reflecting the extended period of low interest rates. Of course, the aggregate figures mask some underlying problems. Two issues worth highlighting are the persistent growth in income and wealth inequality and the burden of rising student loan debt.2 Many people of more modest means don’t directly benefit from rising home and stock prices.
Resolution would naturally go hand-inhand with a greater reliance on instruments such as contingent capital. And there would be enormous challenges in resolving global banks that span countries with different legal jurisdictions. Extending resolution procedures to large institutions is a necessary but not sufficient condition for stability of the banking system. 7. More radical reforms  All of these potential reforms would be steps in the right direction. They would all help to put more of the costs of maturity mismatch on the shoulders of those who reap the benefits. But taxes, the Basel capital requirements, special arrangements for systemically important financial institutions and enhanced resolution procedures all have drawbacks and are unlikely to do the job perfectly. So, if we cannot rely solely on these types of measures, are there more fundamental directions in which we could move that would align costs and benefits more effectively? One simple solution, advocated by my colleague David Miles, would be to move to very much higher levels of capital requirements – several orders of magnitude higher. A related proposal is to ensure there are large amounts of contingent capital in a bank’s liability structure. Much more loss-absorbing capital – actual or contingent – can substantially reduce the size of costs that might be borne outside of a financial firm. But unless complete, capital requirements will never be able to guarantee that costs will not spill over elsewhere.

Second, although many of these positions net out when the financial system is seen as a whole, gross balance sheets are not restricted by the scale of the real economy and so banks were able to expand at a remarkable pace. So when the crisis began in 2007, uncertainty about where losses would ultimately fall led confidence in banks to seep away. This was obvious through the crisis. Almost no institution was immune from suspicion, the result of the knock-on consequences so eloquently described by Bagehot when he wrote: “At first, incipient panic amounts to a kind of vague conversation: Is A. B. as good as he used to be? Has not C. D. lost money? and a thousand such questions. A hundred people are talked about, and a thousand think, “Am I talked about, or am I not?” “Is my credit as good as it used to be, or is it less?” And every day, as a panic grows, this floating suspicion becomes both more intense and more diffused; it attacks more persons; and attacks them all more virulently than at first. All men of experience, therefore, try to “strengthen themselves,” as it is called, in the early stage of a panic; they borrow money while they can; they come to their banker and offer bills for discount, which commonly they would not have offered for days or  2  BIS Review 140/2010  weeks to come.
In the June addendum, the FOMC noted that reducing the Fed’s securities holdings will result in a declining supply of reserve balances, and that it anticipates reducing the quantity of reserve balances to a level “appreciably below that seen in recent years but larger than before the financial crisis.” New York Fed staff projections for possible paths of the Fed’s securities portfolio—constructed using a distribution of market participants’ surveyed expectations for the future size of the Fed’s balance sheet (conditional on not moving to the zero lower bound at any point between now and 2025), along with some staff modeling to fill in details—suggest it will take at least several years for the balance sheet to reach its “normal” size.14 Uncertainty about the time of normalization arises from numerous sources, including future levels and variability of demand for different types of Fed liabilities, the pace at which the agency MBS portfolio will pay down, and of course the economic outlook. Assuming that balance sheet normalization continues uninterrupted, it seems likely that the future balance sheet size will be driven largely by changes in longer-run demand for Fed liabilities —in contrast to the asset-driven balance sheet of the past decade. The FOMC explains in the June addendum that reserve balances will be driven by the banking system’s demand for reserves and the Committee’s decisions about how to implement monetary policy in the future.

Then, in September 2011, the FOMC announced that repayments from these securities would instead be reinvested in agency MBS to help support conditions in mortgage markets.29 The FOMC then maintained reinvestments, including Treasury rollovers, until commencing balance sheet normalization last month.30 Keeping the Fed’s holdings of longer-term securities at sizable levels helped to maintain accommodative financial conditions as economic conditions strengthened. This is because, in addition to the acquisition of securities through asset purchases, the period over which the central bank intends to hold its securities helps to shape market participants’ expectations about the size and duration of assets available to the public. Extending the holding period through reinvestments prolongs this so-called stock effect. The 2010 episode when the Fed was not reinvesting agency-related principal payments demonstrated both term premium effects that might have been expected to be associated with a reduction in the Fed’s securities holdings and the risks associated with an unexpected increase in the publicly-held stock of agency MBS. As we normalize the size of the balance sheet, maintaining redemption caps throughout the process (and continuing to reinvest any principal payments received in excess of those caps) provides an insurance mechanism that limits the amount of variation in the pace at which securities, particularly mortgages, will flow back into private hands. Lesson 5: Credible communications influence the effectiveness of asset purchase programs As a general matter, monetary policy transmits more smoothly when market participants are able to understand and anticipate central bank actions.
1992 Q1 = 100  120  120 Other goods  100  100 Footwear  80  80 Clothing Audiovisual equipment  60 1992  60 1994  1996  1998  2000  2002 2003  Source: Norges Bank  The change in trade patterns has made a considerable contribution to the sharp decline in prices for clothing, shoes and audiovisual equipment. Rapid technological advances have also pushed down prices for audiovisual equipment. In Norway, competition has probably increased in the retail industry and other service sectors in recent years. Initially, heightened competition affects companies’ profit margins. But enterprises will respond by reducing their costs. This will occur in part in the individual enterprise, but subcontractors will also be required to reduce their prices and enhance efficiency. Therefore, increased competition usually triggers higher productivity growth in the economy. Low inflation may therefore be matched by growth in productivity. Chart 19. Import-weighted krone exchange rate and interest rate differential against trading partners Index Per cent 80  5  85  4  90  3  95 100  2  Krone exchange rate (left-hand scale)  1 Interest rate differential (righthand scale)  105 110 2000  2001  2002  2003  0 -1 2004  Source: Norges Bank  BIS Review 11/2004  13  The cyclical downturn last winter, low wage increases last year, fiscal discipline, an unexpected decline in inflation and prospects of low inflation have resulted in a considerable easing of monetary policy.

The MPC is  2  BIS Review 71/2004  emphatically in the first group; we agree with Sherlock Holmes, “It is a capital mistake to theorise before one has data”. Indeed, as Lord Peston, Chairman of the House of Lords Select Committee on Economic Affairs, recently observed, referring to our foot high data pack: “Statistics seem to be [the MPCs] life blood”. Why should this be so? The MPC sets interest rates in response to its assessment of the outlook for economic activity: the key question is whether the level of aggregate demand is above or below the economy’s capacity to supply. The difficulty - and it is a fundamental one - is that we cannot observe the true values of many key macroeconomic variables, such as aggregate demand. Of course, the Office for National Statistics (ONS) produces estimates of such variables. These are derived from comprehensive surveys of firms and households, and provide the most authoritative available guide to macroeconomic developments. But measuring economic activity across the whole of the UK is a hugely complex and difficult task, and 100% accuracy is simply not feasible. And producing reliable estimates takes time. If the ONS waited two or three years before publishing their first estimates, they would have reasonably complete information. But it would be of rather limited value for policy purposes. We need more timely indicators of economic activity, even though these will tend to be less accurate than later estimates.
Asset purchases to push down general interest rates and thus further stimulate the economy can be justified under certain conditions, for example in a situation where the credibility of the inflation target is threatened or when the transmission mechanism via the banking system is weakened.44 But I believe that the threshold for extensive purchases of bonds to safeguard the inflation target should be high. There are sometimes negative side effects of extensive asset purchases that we need to take into account, for example, they may have a negative effect on the functioning of the markets. In addition, it can be difficult to liquidate large holdings when the situation normalises. 43 For a discussion of this and an overview of the literature on asset purchases, including the Riksbank's pur-  chases, see Akkaya et al. (2023) and Andersson et al. (2022). 44 See also my colleague Martin Flodén's discussion of the effects of the Riksbank's purchases in the speech "The Riksbank's losses do not reflect the socio-economic results", 2022. 23 [30]  So we need to learn more about the effects of phasing out or normalising asset holdings. At the moment, of course, there is little experience of this, but we learned back in 2013 that reactions in the financial markets can be strong, when the Federal Reserve announced that it would start tapering its asset purchases. We should consider whether we should not have an exit plan prepared before the next time we need to make major asset purchases.

The Basel Committee may therefore need to review the standards for the LCR and the NSFR. 12  See EU Commission (2023), https://finance.ec.europa.eu/publications/reform-bank-crisis-management-anddeposit-insurance-framework_en. 10 [30]  Another lesson is that Silicon Valley Bank did not take sufficient account of its interest rate risks. Here I would like to emphasise the importance of all banks – including in Sweden – having a good margin for the risks that interest rate changes can entail. 30 years of low interest rates have contributed to increasing the risks in the financial system. Households and businesses in many countries have large debts while prices of homes, commercial properties and financial assets are high. The sharp and rapid rise in global interest rates experienced over the past year has brought interest rate risks into sharper focus. Current global standards require supervisors to take interest rate risk into account as part of the supervisory process, known as Pillar 2. The consequence is that these risks are managed very differently in different countries, and potentially even between different banks. Finansinspektionen has a well-developed model for estimating these risks for the Swedish banks, but, as I said, the rules vary from country to country. In my view, there is reason to harmonise some of these rules. A third lesson is that accounting rules play an important role. When macroeconomic variables change significantly, the difference between the valuation of assets at fair value and at amortised cost can be large. Silicon Valley Bank had invested heavily in US long-term bonds.
Mr Clementi comments on the systemic aspects of the Basel proposals  Speech given by Mr David Clementi, Deputy Governor of the Bank of England, at a Financial Services Authority Conference, held in London on 2 December 1999. *  *  *  Ladies and Gentlemen, I am delighted to be given this opportunity to address you today. I must first express my admiration for the pro-active and thorough way that the FSA is seeking views from the industry on these important proposals. I know that as well as this conference, their efforts have encompassed briefing sessions, circulars to banks, advisory group meetings, and a dedicated website. There will no doubt be a few focus groups springing up in due course! The Bank of England is in turn holding regular meetings with the main trade bodies, while various of the Basel Committees involved in developing the proposals have conducted surveys and received presentations from banks and others. I hope that, at the end of the process, if differences of opinion remain between the authorities and the banking industry, this will be the result of rational divergence between our different perspectives, and certainly not through any failure of communication. I intend to direct my comments to the systemic aspects of the Basel proposals. The Bank has a close interest in this subject and I will start by outlining the relationship between the design of the regulatory system and the Bank’s core purposes.

Thomas Jordan: The various waves of money market turbulence and the measures taken by central banks Introductory remarks by Mr Thomas Jordan, Member of the Governing Board of the Swiss National Bank, at the half-yearly media news conference, Geneva, 19 June 2008. *  *  *  The money markets are the lifeblood of the international financial system. Properly functioning money markets are absolutely essential for the solvency of banks, as well as for the effective implementation of monetary policy. Hence, events on the money markets since the onset of the financial turmoil have been a particular focus of central banks’ attention. So far, there have been three waves of turbulence. At the time of the last news conference, we were almost at the height of the second wave. In the meantime we have experienced a third wave, which peaked in April. An appropriate barometer of the health of the money market is the difference between the three-month Libor and the three-month (T)OIS rate (tom-next/overnight indexed swap). This difference reflects the credit and liquidity premium on unsecured money market trades compared to purely derivative business with virtually no counterparty risk. With the help of chart 1, which can be regarded as a “fever curve”, I would now like to look back at how events unfolded, and comment on the measures which the central banks took in response. The first wave peaked in September 2007.