samchain/econo-pairs-v1 huggingface dataset:
While not the focus of my remarks today, this feature of the UK labour market is an important backdrop to our monetary policy decisions. And if we do too little with interest rates now, we will only have to do more later on. The experience of the 1970s taught us that important lesson. But equally – second – we have to monitor carefully how the tightening we have already done is  Page 12  working its way through the economy to the prices faced by consumers. Our outreach events make clear that we need to calibrate monetary policy with great care to return inflation to target sustainably. That is the best contribution monetary policy can make to a fair society. Thank you for listening  In light of all this, let me conclude with some final thoughts on how we approach the months ahead. At the Monetary Policy Committee’s February meeting, we made a very deliberate change to the way we described our view of the outlook. We moved away from what had effectively been a presumption at our previous meetings that further increases in Bank Rate would be required. In the Committee’s forecast, headline consumer price inflation was projected to fall sharply over the rest of year, more so in the second half. We recognised, however, that further tightening would be required if there were to be evidence of more persistent inflationary pressures.

It is already clear however that it will amplify the headwinds to the strong recovery that the euro –area has been experiencing in 2021, and that it will intensify inflation pressures in a context where inflation has already increased significantly and will remain high over the coming months. The general uncertainty that marks the euro-area macroeconomic environment has implications for the conduct of monetary policy. In these conditions, it is important to balance carefully the risks of waiting too long to act as opposed to those of normalizing too soon. In any case, the  commitment of the ECB is clear: the Governing Council will do what is necessary to bring inflation firmly and durably to around two per cent over the medium term. The forward guidance, relying on state contingent criteria and the “sequencing” are instrumental to this goal. Policy normalization will follow a clear order: the ECB will end its asset purchases first, likely in Q3 2022, then raise the key interest rates, eventually reducing its balance sheet in a third step. All along this gradual process of normalization, the Governing Council of the ECB made it clear that it will maintainoptionality; gradualism and flexibility in the conduct of monetary policy. In that context, financial markets are currently considering that the rise in interest rates might start in the near future, with a first 25 bps hike almost fully factored in (90 %) as of next July, followed by two others by the end of this year.
This in turn became easier when the credibility of the nominal anchor had been established. The flexible policy meant in practice that inflation was to be close to the target, and as a subordinate target, economic activity was to be stabilised. This was also in line with the preparatory works of the new act, which stated that we should attain price stability and – without neglecting this objective – contribute to supporting the economic policy objectives of sustainable growth and a high level of employment. Lessons from the global financial crisis – the policy rate is not sufficient for attaining the targets 11 September 2008. It is four am. I am woken by my telephone ringing. One of the evening papers is calling to ask what is likely to happen on the Stockholm Stock Exchange the next day. As head of analysis at Swedbank, I was expected to have an opinion on this. The attempts to save the US investment bank Lehman Brothers had failed. No one had any idea of the scope of the chaos that was heading for us and how much damage there would be. Only one thing was certain: All of the countries that were able to, needed to implement massive support measures. 17 See Ingves (2015). For instance, surplus targets and expenditure ceilings helped get public finances in order. 18 This was also helped along considerably by the Industrial Agreement and the establishment of the Swedish National Mediation Office.

Rapid inflations produce large, arbitrary reallocations across the whole economy, not just between the public and private sector as a whole. They pollute price signals and make it harder to plan and invest. And even if one’s only concern were with the public finances, they can also lead to uncertainty about future inflation and, because of that, add an inflation “risk premium” to the cost of the government’s future (non-indexed) debt issuance. By 1980, after a decade of extremely high and volatile inflation, the yield on newly-issued ten-year gilts had risen to 14%. Presumably, most of this represented direct compensation for the inflation that investors had come to expect. But part of it may also have been an additional premium to compensate for its sheer unpredictability. What we do know is that inflation gradually came down, albeit in fits and starts, and that the ex post real return on a 10-year gilt bought in 1981 was around plus 150%, nearly 10% a year. In terms of these simple simulations, a risk premium on the cost of future issuance would eventually push the blue and red lines in Chart 8 above their starting point. Finally, even Chart 8 overstates materially the impact of inflation when there are sizeable QE programmes in place. A significant part of the stock of conventional gilts (two-fifths of it) is now owned by the Bank of England’s Asset Purchase Facility (APF), the vehicle through which QE is conducted.
The second is that there are increasingly persuasive reasons to believe that financial markets are materially underpricing the cost of emissions, and hence climate risks.14 There are several possible reasons for this. At the most basic level, the information on which such prices are based – companies’ disclosures on emissions reduction plans and carbon footprints – is somewhat incomplete and inconsistent. But that is improving steadily. More importantly, carbon producers do not for the most part yet bear the full costs that their emissions impose on the wider economy. A key part of the transition to net zero is to internalise those costs, driving a significant increase in the so-called ‘shadow carbon price’ (Chart 6). As that happens, it will put downward pressure on the prices of assets issued by companies who have been least successful in transitioning away from high-emissions activities, increasing their cost of finance. ‘Electricity’ and ‘gas’ sectors include companies that generate, supply and distribute power; ‘industrial & transport’ includes chemical, construction and transportation companies; ‘energy’ includes companies involved in oil exploration and production; ‘consumer, non-cyclical’ includes pharmaceutical and food and beverage companies; ‘property and finance’ includes housing associations and property development companies; ‘communications’ includes telecommunications and media; and ‘consumer cyclical’ includes automotive companies, retail and tourism. Carbon footprint measured using weighted-average carbon intensity (WACI) measures of £ revenue, capturing Scope 1 and 2 emissions. Scope 3 estimates are set out in Section 2 of the Discussion Paper.

14 The evidence for this is discussed in more detail in Section 2 of the Discussion Paper. 13  6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  Chart 6: Shadow carbon price in scenarios shown in Chart 2  Source: IIASA [NGFS Climate Scenarios Database, using marker models]  The question is not whether the shadow carbon price has to rise – the question is when. To the extent that markets are assuming an unrealistically low or distant pickup – and it seems increasingly clear that they are – financial assets today may be mispriced. An ‘adjusted market neutrality’ principle that took this mispricing into account could suggest a very different asset allocation in investment portfolios, including the CBPS. Until recently, the Bank of England lacked the mandate to make such adjustments. In March, however, the Chancellor updated the MPC’s ‘remit letter’ to confirm that the economic strategy of the Government – which the MPC is required to support as a ‘secondary objective’ – includes supporting the transition to a net zero emissions economy.15  Portfolio decarbonisation is not enough: look forward, work together to drive change  Now comes the tricky bit: translating these conceptual insights into practice. At first sight it might seem the answer is simple: just sell all our high-emission bonds, and use the proceeds to buy low-emission ones. The carbon footprint of the CBPS would fall sharply.
BIS Review 124/2007  1

Zeti Akhtar Aziz: Implications of emerging global economy trends for Malaysia Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, on the occasion of the International Women's Day Forum, Kuala Lumpur, 1 April 2008. *  *  *  Fundamental changes occurring in the international environment have dramatically altered the configuration of the global economy. A global shift is taking place resulting in a rebalancing of economic power. Accompanying these changes is the increase in the international mobility of talent and capital flows. In this more dynamic environment, comparative advantages and distinct capabilities are also shifting. This has resulted in a rethinking of the business models and the manner in which we operate to achieve performance. In addition, corporate cultures have needed to change. This reorientation has entailed reviews of the strategic focus, the strategies, approach and processes as well as the redeployment of resources. In conjunction with the International Women's Day that was on March 8, it is my honour to be here today to speak at this forum organised by Accenture. My remarks will focus on the implications of these newly emerging trends in the global economy on Malaysia. More specifically, to discuss the new future that is emerging before us, and the opportunities it accords. Equally important, is the ability to raise the level of our flexibility and capacity to adjust to these changing conditions.
Since this is the first time that a President of the European Central Bank has retired, I have no way of knowing if this is just standard protocol, or if it is something more. I hope it is not just that you are eager, as you  BIS Review 47/2003  1  said in your invitation, to “facilitate my departure”. I prefer to think that it reflects the warm relationship that has been built up among us during the past few years. I remember when it was first proposed to establish a Eurogroup, or “Euro-X” as it was then called. And I remember that some people said that such a group would be a threat to the ECB and its independence. Frankly speaking, I also had some doubts. I was proved wrong. As I have since said in public on various occasions, the Eurogroup meetings represent a “golden opportunity”; a golden opportunity for dialogue; a golden opportunity to be open, to be frank, to be honest, to criticise, and to listen. If you liken EMU to a house, then we are its family, and the Eurogroup is the dinner table. It is where the family members get together to tell each other what they are doing, to listen to each others advice, and learn to live together, as they must do, responsibly. Each member who joined this family did so on the understanding that his new house would be built on two stable pillars; not just a sound monetary policy, but also sound economic policies.

The staff, past and present should be proud of the useful contribution, you have made towards the steady progress the Bank has made in its quest to attain its mission of “achieving and maintaining price and financial system stability for balanced macroeconomic development”. Ladies and Gentlemen, this progress, has however, not been with any challenges. Among the challenges was, the Global Economic and Financial Crisis during 2008/2009, which adversely affected most economies. It is, therefore, of utmost importance that we reposition ourselves to mitigate these types of challenges should they threaten to recur in the future. Colleagues, this 50th anniversary celebration therefore presents us with an opportunity to reflect on the achievements and challenges of the Bank since its inception. You will recall from my “Town Hall Speech” to members of staff in January 2014 that going forward we need to work harder and build on the successes we have scored in the past, by focusing on enhancing productivity and accountability under what I termed “The New Bank We Need”. In repositioning ourselves, I would like to remind you of some of the tenets we need as the New Bank which include the following: 1. Productivity and accountability;  2. Strong team work operating under set values and ethics;  3. Open and effective communication among staff; and  4. Meeting targets and providing workable solutions.
11 In particular, according to Met Office (2018), by 2100, in parts of the UK sea levels could rise by up to 70cm in a ‘low emissions scenario’, and by up to 115cm in a ‘high emissions scenario’, relative to their 1981–2000 levels. See Box 6 in PRA report (2018): ‘Transition in thinking: The impact of climate change on the UK banking sector’ for more detail on the impact of flood risk on residential mortgage portfolios. 12 See announcement. 13 See IEA and IRENA (2017), ‘Perspectives for the Energy Transition’. The estimates are for a scenario compatible with limiting the rise in global mean temperature to 2°C by 2100 with a probability of 66%, as a way of contributing to the ‘well below 2°C’ target of the Paris Agreement. 9  6  All speeches are available online at www.bankofengland.co.uk/news/speeches  6  Financial companies will need to continue to adapt if they are to be able to serve in this new environment. Their business decisions will need increasingly to reflect the risks. So we’re testing their ability to do this. We’re going to stress test individual firms and the financial system for resilience to climate risks. Our stress test will be the first of its kind to integrate fully climate scenarios with macroeconomic and financial system models. The Network – of central banks and supervisors – for Greening the Financial System is currently working to develop a set of climate scenarios for regulators to use.

He worked on economic reconstruction in Afghanistan, and on coordination of financial policy with the G7 countries. All in all, an impressive job. Currently, John is a member of the G20 Eminent Persons Group on Global Financial Governance, which aims at improving the functioning of the global financial architecture and governance. No less fascinating is John Taylor the teacher in both ‘quantitative’ and ‘qualitative’ terms. On the one hand, he has given countless speeches, hundreds of lectures, written several Page 3/4  textbooks and developed online courses. On the other hand, he is known for mixing teaching with entertainment. Indeed, John does not hesitate to use special didactic techniques to help students understand or remember material. During his classes, to cite just one example, John enters into a humorous dialogue with Adam Smith, revealing deep enthusiasm and dedication to the job. And by the way, this example is quite remarkable for someone who describes his humour “as mostly deadpan”, so that it generally takes a few lectures before his students are able to figure out when something is actually a joke. Having talked about John’s three occupations separately, I should emphasise how well they interact and stimulate one another. Research is integrated into college lectures; government work has enabled him to understand policy constraints, while this in turn has stimulated research. “Economic research,” John once wrote, “is most exciting and productive when it is policy-driven.” Karl Brunner could not have agreed more.
Second, the bilateral nature of the OTC derivatives market – between the two parties to the contract – be it dealer and customer or dealer and dealer – created its own set of difficulties. When counterparties became concerned about the health of a particular dealer, they often moved their trades – via novation – to other dealers. They did this to protect themselves should the dealer subsequently fail. But this process was difficult to carry out quickly and in size. The cumbersome nature of the process disturbed market liquidity and function. It also tended to drain off the liquidity from the troubled dealers because these dealers often used the counterparty cash collateral to fund their own operations. When customers moved their  BIS central bankers’ speeches  1  business, the collateral balances departed with them and this worsened the funding crunch on the troubled dealers. Third, when a large counterparty, Lehman Brothers, filed for bankruptcy, it could no longer meet its obligations. The claims of Lehman’s customers, including those open OTC derivatives positions in which Lehman owed them money, were frozen. The lack of adequate segregation of the customers’ assets from the Lehman estate and the inability to move the outstanding obligations to other dealers – which we refer to as the lack of portability – created large problems for Lehman’s counterparties. Often Lehman’s clients were in the position that one side of a trade executed with Lehman was frozen, but the offsetting side remained open and exposed to volatile financial markets.

Among these potential mechanisms, particular importance was accorded to the so-called “competitiveness channel”, which works as follows: when an economy’s inflation rate stands systematically above the average for the rest of the area, the very loss of competitiveness involved – or, what amounts to the same, the relative rise in the cost of output in that economy – tends to reduce demand-side pressures and ease the tensions on prices that led to the initial slippage. However, for this channel to work economies should, inter alia, be adaptable and sufficiently flexible, something which, for social and political reasons, is evidently not easy to achieve. It was also thought monetary union membership would prompt greater discipline in economic policy management. It was assumed that, if a Member State’s management of the economic instruments available to it was inadequate, the subsequent adverse effects on its growth and employment-generating capacity would lead international investors to demand greater returns for investing in the country, or even to freeze such investment. The subsequent tightening of financing conditions would discipline economic agents and ultimately redress economic management. But this mechanism did not work because financial markets, rather than punishing divergences, instead financed excesses, contributing to exacerbating tensions. Unsurprisingly, then, the crisis has called into question the consistency of the institutional arrangements underpinning the euro. The solution would involve a reformulation of the initial project, geared to fuller integration.
There have been far too many instances in which bankers have not lived up to expectations. But it is also true—and I’m sure you have experienced this—that you have advanced in your careers because you have demonstrated personal attributes that anyone would be proud to possess. I mentioned before honesty, competence and reliability. You could add to that list hard work, perseverance and responsiveness. Moreover, if you are like me, your careers will have benefitted from teamwork—the good fortune to work with capable colleagues. Individual effort is essential, but success often depends as well on the contributions of others.6 Whatever list you have come up with, make sure that teamwork is among your core personal principles. I would also like to make a slightly different observation on banker ethics. What’s missing is not so much a personal commitment to good conduct, but rather a commitment to call out bad conduct observed in others. You might think it is a paradox or a contradiction to praise teamwork in one breath, and then in the next breath to call for raising the red flag when you see bad conduct in others. I do not see it that way. We hear often that integrity is a corporate value. I think what is often meant by this is honesty— doing what you say, and saying what you mean. But integrity, to me, has an additional meaning. It means operating according to a single, internally consistent set of principles.

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The Stability and Growth Pact has been strengthened to preserve fiscal stability; and a new procedure – the Macroeconomic Imbalance Procedure – has been established to prevent the accumulation of other non-fiscal imbalances. Also, the European Stability Mechanism and the banking union process have filled in two serious gaps. Now, to conclude, I shall try and respond to the questions to this panel about Germany’s role in the European debt crisis and whether Germany is a reluctant hegemon. Indeed, Germany has played a key role in the response by the European Monetary Union to its financial and fiscal crisis and to the dangers this crisis has entailed for the Union and the euro. In early 2012, many analysts and politicians considered it very possible that certain BIS central bankers’ speeches  1  countries might exit the Monetary Union, thereby triggering an extremely serious crisis. Many believed the European Monetary Union was running an almost terminal risk, at least in its formulation under the Maastricht Treaty. To Germany, then. Its economy and its Government have been fundamental in facing and overcoming these risks. Without a German political stance in defence of the Monetary Union and the euro, the single currency would surely not have survived. Obviously, Germany has not acted alone, but as the euro area’s leading economy, its role has been crucial. I do not believe Germany may be said to have exercised this role reluctantly.

Luis M Linde: “The New Hegemon or Last Country Still Standing” Speech by Mr Luis M Linde, Governor of the Bank of Spain, at the Frankfurt Finance Summit 2014, Panel IV: The New Hegemon or Last Country Still Standing, Frankfurt am Main, 20 May 2014. *  *  *  As a result of the crisis, the institutional and intellectual setup of European Monetary Union is being deeply revised. Fresh views on the role of stability across several dimensions – including fiscal and macro-financial – have emerged and taken over the old approach of the Maastricht Treaty. Several players, including, indeed, the ECB, are contributing to this overhaul. I would like to review the main elements of the old institutional setup, the weaknesses revealed by the crisis and the way a reinforced culture of stability is contributing to their repair. The monetary union designed in Maastricht included, in addition to the ECB and the single monetary policy, a relatively loose governance framework for the euro area based, first, on a fiscal discipline device – the Stability and Growth Pact – and, second, on coordination for the remaining economic policies – the Broad Economic Policy Guidelines –. The setup also relied on governments, households and firms being able to internalise the stability patterns required within a monetary union and counted on financial markets penalising those who would not do so.