samchain/econo-pairs-v1 huggingface dataset:
The road ahead These initiatives are important down-payments towards closing the trust deficit. Yet even if these initiatives are necessary steps, are they likely to be sufficient? The Bank’s Open Forum suggested that would be an optimistic conclusion. So too would the evidence from various opinion polls and, indeed, from banks’ own assessments of their culture. If so, what further initiatives might help in closing the Great Divide? It may be tempting to conclude that the trust gap can be closed by simply having a bettereducated public, one which better appreciates the important role finance plays in supporting the economy and wider society. On this diagnosis, closing the Great Divide would call for enhanced public understanding of finance, perhaps through a targeted public education programme. Yet as Gillian Guy, CEO of Citizen’s Advice, perceptively pointed out at the Bank’s Open Forum, the perception gap may as much reflect the lack of understanding of the public on the part of those inside finance as a lack of understanding of finance on the part of the public. I think that is spot on. Closing the perception gap calls for a two-sided effort. (a)  Enhancing public education  A great many people find financial issues difficult and boring. That is a weak foundation for making good financial choices. At least some of those problems originate in the mental block many people encounter when it comes to mathematics. Finance is a numbers game.

What is the conceptual framework for the performance of central bank functions today? That is to say, how do they decide on their monetary policy stance given the economic situation? Although there are differences between central banks, I believe it is possible to generalise by saying that the prevailing framework is based on the idea that, as a result of various economic frictions, including notably price and wage rigidities, the economy may deviate from full employment and stable prices. The central bank is capable of influencing the state of the economy through changes in the nominal interest rate. These changes affect in turn the real interest rate, i.e. the interest rate adjusted for inflation, which is the relevant one for the investment and consumption decisions of firms and households. 4/7  Thus, by indirectly affecting the spending of economic agents, the central bank exerts influence over inflation, attempting to stabilise it at moderate levels. With this objective, the central bank attempts to ensure that the real interest rate is as close as possible to the economy’s “natural” interest rate, i.e. the rate that would prevail if the economy did not suffer from the frictions that I mentioned. The natural rate, which in recent years has given rise to endless debate among economists, depends on structural parameters, including most notably demographic developments and technological innovation. If the actual interest rate is above the natural rate, the monetary policy stance is contractionary, leading to an excessive decline in prices and economic activity.
It is clear that if real wage growth in the coming years is in line with productivity growth, this will facilitate the Riksbank's efforts. The Riksbank's forecast during the summer rested on the assumption that a weaker labour market would restrain the rate of wage increases to just over 3.5 per cent. But there are examples of wage bargaining rounds in which wages increased excessively despite weak demand pressures, e.g. 1995. The conflict over the Municipal Workers' Union's agreement is also indicative of tensions in the labour market. However, the two most recent wage bargaining rounds have been characterised by greater cooperation between labour market organisations. In addition to current economic conditions, this suggests that the forthcoming wage negotiations should result in economically reasonable wage rises of around 3.5 per cent. It is worth underscoring, however, that no one factor is as important for inflation - and consequently for the repo rate - as wages. The Riksbank will therefore be monitoring the autumn wage bargaining round closely. One factor that has proved difficult to assess in recent years is energy prices, in particular those for electricity. Energy prices have not fallen back as much as we expected during the summer. In August, UND1X inflation excluding interest expenditure, among other things, rose by 2.2 per cent, of which 0.7 percentage points were due to the increase in energy prices. Current forward prices suggest that electricity prices will be approximately 10 per cent higher during the autumn and winter than was indicated before the summer.

Jean-Pierre Roth: The current economic and monetary policy situation Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at the Centro di Studi Bancari, Vezia, 17 September 2007. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  It is difficult to determine to what extent the turmoil in the US sub-prime mortgage market impacts on the real economy. It has hit Switzerland at a time when our economy is in enviably good shape. Should the situation in the financial markets not deteriorate any further, it is hard to imagine these factors abruptly slowing economic growth. With its decision to let the Libor slide back towards 2.75% in the short term, the SNB has clearly signalled to the markets an easing of the situation. In Switzerland, price stability has been maintained for the past 13 years, economic growth is significantly higher than in the 1990s and our unemployment rate is the lowest of all industrialised countries. It is our goal to preserve this favourable situation. BIS Review 102/2007  1
I think you can all imagine how complicated it could be to achieve anything like “a clear line of command” when there is a multitude of countries – and perhaps several authorities in each of these countries – involved in the decision-making. Then there is no longer merely the financial supervisory authority, the finance ministry and the central bank in one country that have to be involved, but all of these authorities in several countries. If there are no prior agreements on the division of responsibilities between the national central banks and the other relevant crisis management authorities, and on how to coordinate decisions in the case of a crisis, there is great risk that any attempt to manage the crisis will fail miserably. Language differences and different legal structures can often reinforce the problems. On top of this, there is a clear cross-border mutual dependence, which means that no single country’s authorities are entirely sovereign in implementing a solution to the crisis without the risk of significant repercussions in other countries. Recently, there have been a number of initiatives, regionally as well as on a European level, to enhance coordination. For example, a number of memoranda of understanding (MoUs) have been worked out and agreed, either bilaterally or multilaterally, and more MoUs are underway. These MoUs detail a number of principles and practical issues regarding the cooperation, the exchange of information and assessments between authorities and certain issues concerning the delineation of responsibilities.

And because we share similar experiences – still fresh in our memories – of major banking crises in the Nordic countries, we have perhaps a head start when it comes to recognizing and trying to deal with these challenges on a Nordic level, even if much worksstill remains. Here, I might add that integration on a pan-Nordic level has also come a long way in the area of securities exchanges and clearing and settlement facilities. Of course, the integration of the financial infrastructure poses similar challenges for authorities to cross-border banking and some additional complications as well. However, today I will focus on the challenges posed by cross-border banks. And I must stress that these challenges are not merely a regional problem. Due to the dynamic changes in the banking landscape, they will indeed require solutions on a European level. My main message today is that increased coordination is imperative, and, in this, it is vitally important that future arrangements for supervision, crisis management and crisis resolution of cross-border banks must be dealt with jointly as a package, and not in isolation from each other. It is apparent that the solutions in any one of these areas will depend on the solutions in the other areas. In particular, it will be necessary to address the issue of burden-sharing arrangements for the eventuality that a border-crossing bank becomes insolvent. If we don’t, there is a great danger that crisis management fails and valuable time will be lost.
If there is one message that a wider public audience takes away from my remarks this morning, I hope it is that. Returning inflation to its 2% target is at the heart of the MPC’s actions over the past 10 months. Ceasing asset purchases; starting to raise Bank Rate; beginning to shrink the asset portfolio; considering starting to sell gilts acquired via QE: all these actions serve to tighten monetary conditions and weigh against inflationary pressures. Of course, there is always the question of whether these actions should have come earlier or been more aggressive. In assessing these claims, we need to be wary of hindsight bias, and recognise the benefits of adopting a measured, determined and purposeful approach to the transition from the very accommodative policies introduced during the global financial crisis and maintained more or less ever since. But now that the initial stage of that transition have been successfully navigated, an immediate issue for monetary policy makers is whether the pace of policy tightening now needs to change. In May, inflation reached 9.1%. [4] The MPC forecasts a further rise to around 11% later in the year, once rises in international commodity prices stemming from Russia’s invasion of Ukraine pass through to UK utility and food prices. For an MPC member charged with achieving the inflation target of 2% – someone in ‘the price stability business’, if you like – this is obviously a very unsatisfactory situation.

As a result, the case for maintaining forward guidance to smooth the transition is, at least in my view, much diminished. On this basis, the ‘further tightening’ forward guidance that had been in place in MPC statements since November – despite its evolution over the intervening period – had come to outlive its usefulness. Speaking from the collective perspective of the MPC, using forward guidance of that form requires near-unanimity across members of the Committee if it is to be meaningful. But, as the patterns of individual votes on Bank Rate in recent months reveals, unanimity about the short-term interest rate outlook no longer exists. We should not be defensive about that. One of the strengths of the MPC set-up is individual accountability and the diversity of view that it encourages. At a time when inflation is elevated, monetary policy faces substantial challenges, and uncertainty is heightened by geopolitical and epidemiological concerns, it would be not only surprising but also worrying if all MPC members moved in lockstep. For all the commentary about ‘group think’ on the Committee, I see little evidence of that in our discussions or published votes. But trying to shoehorn that necessary and constructive diversity of opinion into a common statement[15] is understandably – and probably inevitably – confusing. It certainly is hard to encompass the prevailing diversity of opinion into a short and clear statement of forward guidance. And if, in that context, attempts at guidance create confusion rather than clarity, then surely the time has come to retire them.
It is important that macroeconomic imbalances should be avoided and that a critical mass of structural reforms should support a sustainable growth path. This lesson holds particularly true for the emerging economies. Over the past several years, I have repeatedly pointed out in my speeches that convergence with the EU along with maintaining macroeconomic stability is the major challenge facing Romania. In recent years, fast-track economic growth drew on external saving. Banks became dependent on external financing and the current account deficit exceeded the sustainability limits, which caused the Romanian economy to grow vulnerable. The global crisis fostered this vulnerability which translated into a marked economic slowdown. Today it has become clear that the natural bias towards speeding up real convergence needs to be balanced by the need to ensure a sustainable convergence process. The NBR has repeatedly warned against the pro-cyclical nature of the fiscal policy, which added to excess demand. We should learn the lesson that allowing wide budget  4  BIS Review 56/2009  deficits while the economy is expanding ends in failure. It would have been much easier today for us to find the means to weather the crisis if our budget had been on a surplus over a two-year period prior to the unleashing of the crisis. 9. The adoption of the euro cannot be a substitute for the need of domestic policy adjustment. This lesson became clearer at the moment emerging economies were hit by the economic crisis.

As shown in the chart on the right of slide 4, this indicator reached unprecedented levels in early 2007 for the Japanese yen, suggesting that carry trading has grown significantly since the beginning of 2006. In Box 4 of the FSR, a close look is taken at the evolution of the foreign exchange carry trades. The conclusion is that, from a financial stability perspective, large outstanding carry trade positions may be a concern if they make the targeted financial markets vulnerable to unexpected changes either in short-term interest rates in the funding currency or exchange rate volatility. A pertinent issue for the outlook for financial stability is whether there have been signs of a turn in the US credit cycle. The assessment of the markets and banks appears, on the face of it, to be somewhat divided. For example, credit spreads on sub-investment grade bonds have narrowed further, but US banks are no longer easing their credit standards on loans granted to firms. The fundamentals of US firms have overall remained strong. Although rating downgrades have outpaced upgrades in the US credit market, this deterioration of credit quality has not translated into higher default rates. It has been suggested that the existence of abundant market liquidity is one of the reasons why rating agencies have, since late 2004, consistently revised their forecasts of rising global default rates, pushing them further into the future (see the chart on the left of slide 5).
They have imposed rigidities and inefficiencies in the setting of deposit rates and have inhibited the development of new products on the liabilities side of the balance sheet. The removal of long-standing controls is not however an easy process, and may bring with it certain risks and drawbacks. From the banks’ point of view, the obvious problem is that they may have to pay higher interest rates, or interest for the first time, on the previously regulated deposits. The effect on margins will be exacerbated if deregulation leads to a price war with banks aggressively bidding for deposits. At this point, the banking regulator may also become concerned if it appears that the banks are neglecting the management of their interest rate risk and liquidity risk. This is obviously something that is a potential concern with the impending deregulation. But the banks have had plenty of time to prepare. Moreover, the current excess liquidity in the system means that the incentive to bid too aggressively for new deposits should be reduced. Having said that, some banks will no doubt see deregulation as an opportunity to expand their customer base, and will price their deposits with this objective in mind. This brings me on to the impact of the deregulation for consumers. There has perhaps been too much of a tendency in some quarters to see deregulation as something that would bring benefits for all. This was not the view of the HKMA.

To do otherwise may in the long-term be inconsistent with the objective of creating shareholder value. What this means in practice is that in imposing new charges, banks need to be sensitive to the impact on their customers and particularly on the more vulnerable members of the community. It is important to offer customers options for how they can access banking services and at what cost, and to provide them with information about these options and the associated charges. I am pleased to say that the banks that have so far announced new charging policies have borne these considerations in mind. We  2  BIS Review 29/2001  intend to give this further underpinning through revisions to the Code of Banking Practice that will lay particular stress on the need for transparency in the setting of charges. There have been calls from some quarters in Hong Kong that the HKMA should regulate banks’ fees and charges. This is not something that we want to get into. The only role for the HKMA would be if it appeared that the banks were engaging in collusive, anti-competitive practices in their charging policies. There is no evidence of this as yet, and given the way in which banks compete in other business areas, the risk of collusion seems quite low. Indeed, a number of banks have already said that they will not impose new charges, for the time being at least. Nonetheless, this is something that we will keep an eye on.
The Central Bank interest rate that made the greatest impact on other rates was 17% a year ago, when the Bank held its 2009 Annual General Meeting. As of today, the corresponding interest rate – the average of current account rates and the highest CD rates – is just over 8%. But although interest rates have fallen significantly, it cannot be denied that they are still higher than desirable in view of the slack in the national economy, and they could be lower if the inflation outlook were the only criterion. This is the price we pay for the currency and banking crisis, the lack of credibility in foreign capital markets, and the limited access we have to those markets. Simply put, Icelandic interest rates include a large risk premium. If the capital controls are effective, as they appear to be at present, they obviously provide some scope to look beyond this risk premium. But the controls have not yet been tested by sharp and deep reductions in interest rates and a smaller interest rate differential with abroad than currently exists. Until now, there has been no occasion to take interest rate decisions based on the assumption that no steps will be taken to lift the capital controls in the near future. We hope no such circumstances develop. Strictly speaking, monetary policy in Iceland is not following the inflation target at present.

For example, it has been argued that “systemic” financial institutions should be more closely supervised and be subject to a more stringent set of regulations. How exactly to define systemic institutions, and who should deem an institution systemic is far from clear. Closely related reforms are those aimed at reducing interdependence and, therefore, the systemic nature of institutions. The push towards central counterparties, in particular for derivatives, falls in this category. The second category of reforms encompasses those directly related to the specifics of the subprime crisis. I would like to offer some comments on these issues. In particular, I would like to comment on a) accounting methods; b) liquidity; and c) rating agencies. Accounting methods and valuation At the onset of the financial turbulences, there were strong concerns on how precise was the information reported by banks, how large were the losses, and who was bearing these losses. This uncertainty was a critical factor in the shutdown of key financial markets. The International Accounting Standards Board (IASB) and the Financial Stability Board (FSB) have been working and promoting recommendations on accounting and disclosure standards for off-balance-sheet investment vehicles, and fair value methods, among others. However, these “information” requirements by themselves are not enough, and other measures could be necessary, such as forcing originators and other agents to hold part of the risk of the assets created. Liquidity The current financial turbulence has highlighted that for the banking sector liquidity considerations are as relevant as solvency issues.
Ultimately, the resulting increase in flexibility means that the SNB can better contribute to keeping Switzerland on the road to competitive success. BIS central bankers’ speeches  5

Lek appreciated on average by 2.3 percent against the euro in 2016 and 2017, while it appreciated by around 7 percent during the first half of 2018. Our analyses indicate clearly differing explanations for the pre and post 2018 appreciation. The 2016–2017 lek appreciation has been largely in line with improving fundamentals in the economy. Some of these structural improvements include: Declining current account deficits, on account of improved exports; Increased capital inflows, on account of high FDIs; Reduced financial market risk premia and increased confidence in our financial institutions. 2/3  BIS central bankers' speeches  On the contrary, the rapid appreciation we experienced in 2018 has been largely a FX market driven phenomenon. News of a sudden and sustained influx of foreign currency induced onesided expectations in the FX market. These expectations were reflected in an accelerated supply of foreign currency and delayed demand for it, generating a vicious cycle of continued appreciation. The Bank of Albania did not react upon the real appreciation trend of the past two years. While minor miss-alignments were still present, we assessed the trend was largely driven by improving fundaments. Thus, it allowed us to focus our monetary policy on achieving our 3 percent inflation target. We also did not react upon the recent financial market driven appreciation, in full consistence with our monetary policy and exchange rate regimes. We expected for the market to self-regulate and contain these shocks. However, this did not prove to be the case and the exchange rate appreciation accelerated.