samchain/econo-pairs-v1 huggingface dataset:
I believe the LSAPs conducted by the Federal Reserve have had substantial beneficial effects on the U.S. economy and that the objections that have been raised against them are not convincing. Forward guidance about the future policy rate has been used as an unconventional tool in statements by the Bank of Canada, the Bank of Japan, and the Federal Reserve during the crisis. However, forward guidance in the form of published policy-rate forecasts have for several years been a conventional policy instrument for the Reserve Bank of New Zealand, Norges Bank, the Riksbank, and the Czech National Bank. I have long been in favour of the publication of a policy-rate forecast on a regular basis, based on both the existing practical experience of publishing such forecasts and the fact that what matters for the economy and private-sector decisions is not what the policy rate is during the one or few months until the next policy meeting but what the longer interest rates are. These longer rates result from market expectations of future policy rates and term premiums. Publishing a policy-rate path would be the most direct way to affect interest-rate expectations, especially since central banks should have better information about their own intentions than anyone else. Based on the observation that emerging-market economies have received large capital inflows lately, with risks of bubbles and other negative effects, some observers suggest that the effects on capital flows to other countries should be taken into account when, for instance, the Federal Reserve sets its monetary policy.

The challenge for the MPC is to assess when inflationary pressures will be building and thus when we need to start withdrawing stimulus, so that once we have eliminated slack in the economy, monetary policy is consistent with stable, sustainable growth and hence stable inflation around the target (subject of course to the other forces acting on the economy at the time). That’s an extremely optimistic expectation of what policy can achieve, so let me put it slightly differently. The realistic challenge for the MPC is to avoid a big mistake either by choking off the recovery too soon, leaving the economy in a quagmire, or by allowing inflationary pressures to build excessively, requiring a sharp tightening in interest rates (and the potential for another recession) to bring inflation back under control. Forward guidance is a policy framework designed, amongst other things, to help avoid big mistakes. We can encourage and probe growth in the economy by committing not to tighten policy until the economy has used up more of its spare capacity. On one view the policy is simple – we must give the economy plenty of time to establish the recovery before we start to raise interest rates or unwind asset purchases. At another level, some critical judgements are  BIS central bankers’ speeches  3  going to be needed because the timing is inevitably uncertain. Given those uncertainties, forward guidance delivers a framework within which the MPC can explore the scope for economic expansion without putting price and financial stability at risk.
As a result, the excess reserves wouldn’t be lent out; instead, the excess reserves would stay parked at the Fed. That said, the Fed’s exit from its current monetary policy stance is going to be more complicated than normal. Normally, when we exit, we simply decide when we are going to raise the federal funds rate target. This time, we have a broader set of decisions to make. For example, do we drain reserves from the banking system? Is it better for the banking system to operate with $ billion of excess reserves or $ trillion? This is an issue we have to explore further. In the meantime, we are testing our ability to drain reserves through the use of reverse repurchase agreements. It is important that this option be available to us in the event we want to use it. Although it is going to be more complicated in the sense that we have more decisions to make about how to manage our exit, I believe the process is manageable. The fact we have  BIS Review 161/2009  7  more levers doesn’t mean that we will have trouble exiting when the time comes, it just means that we will have more choices to make. Turning to the issue of the Federal Reserve’s monetary policy independence, I believe this is a critical issue. As you know, the Paul amendment, which was inserted into the House Financial Services bill, would subject the Federal Reserve’s monetary policy decisions to audit by the General Accountability Office (GAO).

Third, financial stability may be in danger when strong action by central banks during a crisis leads market participants to rely excessively on central banks as a backstop in case of negative shocks. This is the moral hazard problem.9 Taken together, these channels underline the risks the current “low-for-long”-situation presents for financial stability. These risks have to be acknowledged and acted upon. The fact that it is possible for these risks to exist while monetary policy is responding appropriately to the macroeconomic situation perfectly illustrates the Tinbergen principle – the number of instruments must equal the number of policy goals.10 In the current environment, the interest rate cannot be the instrument of choice for addressing financial stability risks. The answer is to give more weight to what are known as macroprudential instruments implemented as a complement to, and along-side a monetary policy that remains firmly focused on price stability. These instruments directly target the risk-taking behaviour underlying financial stability risks. This is exactly the approach chosen in Switzerland with the activation of the countercyclical capital buffer. By forcing banks to build up additional capital in the current phase of strong credit growth, the regulators aim at improving the capacity of the banking system to bear losses in the event that the identified risks materialise, while also limiting the further build-up of these risks. Outlook We are now in a position to derive the implications of our analysis for the interest rate outlook.
In its latest report on Croatia6, the Commission has released the assessment showing that both household and corporate debt are within prudential levels, though still above the levels suggested by the economic fundamentals. The risks are moderating, but remain relevant mainly related to high concentration of corporate debt, exposure to currency risk and potential solvency risk for companies due to the high debt burden relative to corporate financial assets and equity. 5  European Commission Country Report Bulgaria 2019 Including an In-Depth Review on the prevention and correction of macroeconomic imbalances. 6 European Commission Country Report Croatia 2019 Including an In-Depth Review on the prevention and correction of macroeconomic imbalances. 10  Chart 12. Private debt to GDP by countries  Source: IMF Global debt database. Overall, private debt appears sustainable in most CESEE countries, though risks still remain. External environment remains challenging, making the region vulnerable to economic downturn, capital flows reversals and sharp tightening of financial conditions globally. In the event that monetary and financial conditions remain easy for too long, it may stimulate excessive risk-taking and build-up of financial stability risks. This calls for authorities in the region to maintain and further strengthen macro-prudential frameworks, if needed, to reduce vulnerabilities and enhance resilience to shocks. 11  *** The second issue that we tackle in this note is the phenomenon of “missing inflation” and the “wage–price puzzle”.

The contribution of the core inflation and food and energy prices to the overall inflation rate in the countries of the CESEE region in the last six years on average is generally balanced, with core inflation weighing slightly more. In the euro area, 76% of the average inflation dynamics was driven by the core inflation, and the rest by the more volatile prices. Compared to the 2002-2012 period, on average, in the last couple of years, the importance of core inflation for the dynamics of the headline inflation is much more pronounced, both in the region and the euro area. It either indicates that demand pressures and cost-push factors are becoming more prevalent, or that the pressures from the global commodities prices are becoming lesser. 13  Chart 15: CESEE and euro area headline inflation and core inflation developments 8.0  Chart 16: Contribution of core inflation and food and energy component to headline inflation in CESEE and Euro area (in p.p.) 6.0  CESEE inflation, %  7.0  5.0  CESEE core inflation, %  6.0  Euro area inflation, %  4.0  5.0  Euro area core inflation, %  3.0  4.0  2.0  3.0  1.0  2.0  0.0 2002-2008  1.0  2015-2019  2002-2008  Euro Area  2009-2014  2015-2019  CESEE  Core inflation, average (contribution to inflation, in p.p.) 2018  Source: IMF WEO Database, Eurostat and National Statistics.
Putting it bluntly, that would make it less easy to get rich quick irrespective of the quality of business transacted or the compliance culture in their part of the firm. This points to revisiting the terms and scope of the existing codes on remuneration of the G20 Financial Stability Board, the European Union and, in the United Kingdom, the Financial Services Authority. Industry structure and system resilience Incentives will also be influenced by measures that constrain the structure of banking. The UK’s plans to ring-fence banks’ more basic retail banking business will do more than help to make complex banks resolvable. The domestic-intermediation part of banks’ activities will effectively be separate from the entrepôt, wholesale business centred in the City of London. This will make it somewhat easier to see what is going on – where profits are coming from; how much capital is allocated to domestic intermediation, etc. It will also help establish different cultures in different lines of business. Within domestic commercial banking, we need somehow to unwind some of what I think of as the industrialisation of retail and business banking that occurred during the years of plenty. Branch and regional banking came too close to being seen as an exercise in sales and marketing. The role of local branch managers in making loans has been diluted over recent decades, replaced by credit-scoring techniques operated from the centre. Banking is about credit judgments. Boards need to think about how to re-inject that into the role of banks’ front line managers.

Bank of France reports industrial activity increased in all sectors in December 1996 BANK OF FRANCE, MONTHLY BUSINESS SURVEY, December 1996. In December, according to the business leaders surveyed by the Banque de France, industrial activity increased in all sectors, except in the intermediate goods sector, where it remained stable. The food processing and consumer goods sectors were the most buoyant. The capacity utilization rate remained virtually unchanged. Overall demand firmed on both the domestic market and the export market, where the strongest flow of orders continued to come from the United States and Asia. The competitiveness of French products was bolstered by the recovery of currencies that had weakened earlier, including the United States dollar, sterling and the Italian lira. Order books approached normal levels in all sectors, except in the intermediate goods sector, where they remained too low. Inventories decreased with the end of the lorry drivers’ strike, and now appear to be normal in the capital goods and automobile sectors. In the coming months, most sectors are expected to continue to show moderate growth. Commodity prices as a whole showed practically no change. Finished product prices held up overall, despite the continuing high level of competition. Investment programmes were limited to renewing obsolete equipment or to meeting the desire to increase firms’ productivity in an intensely competitive international environment. There were few plans for output capacity increases and in all cases were dependent on stronger growth in demand.
Ladies and Gentlemen, our country needs professionals with high levels of social and moral awareness so that all of us are aware of the moral obligations and potential impact of our thinking, decisions and actions. We need to be good role models for others in behaviour, attitude and relationships. Let us endeavour to act in a way that is professional and that retains the confidence of the public at all times. I thank you for your attention. 2  BIS Review 159/2009

A salient feature of the Norwegian economy is the importance of oil revenues, which may fluctuate considerably from year to year. The Government Petroleum Fund was established to serve as a buffer against fluctuations in oil revenues. It dampens the impact of changes in oil prices on the Norwegian krone. In recent years, a number of countries have switched to a monetary policy regime based on a target of low inflation. With a passive fiscal policy, monetary policy then in practice assumes a greater role in the stabilisation of economic developments. In Norway, we have a different institutional structure and monetary policy objective. When the krone has been stable and inflation shows signs of rising, Norges Bank’s first reaction is to inform the political authorities that measures other than those available to the central bank are required. Norges Bank would do the same if the requirement of returning the krone to its initial range could no longer apply. In a country with an inflation target, the central bank would deal with this itself, without first consulting with the government authorities. However, as mentioned, Norges Bank cannot with open eyes inflate or deflate the economy. Norges Bank’s mandate must be viewed in the light of the emphasis placed by the government authorities on conducting a disciplined, but active fiscal policy. The mandate gives Norges Bank a basis for conducting a monetary policy that provides a nominal anchor for the Norwegian economy.
One obvious reason for this is that macroprudential policy is not yet in place in many countries and where there is a macroprudential policy, it has often not yet been put into practice – it is quite simply too new and untested.25 The policy rate is thus as yet one of few instruments available for practical use. 22  See, for example, Nyberg (2005), Ingves (2007) and Heikensten (2008). 23  See, for example, Mishkin (2007) and Cagliarini, Kent and Stevens (2010). 24  See, for example, the Committee on International Economic Policy and Reform (2011) and Mishkin (2011). 25  Woodford (2012), who develops a theoretical model for how financial stability considerations can be incorporated into inflation targeting, notes for instance: ”[I]t cannot be claimed that such tools already exist and  10  BIS central bankers’ speeches  But there is also an international discussion on whether the policy rate will have a role to play even when macroprudential policy is in place.26 One reason is that it may very well prove difficult to design a system for macroprudential policy that functions sufficiently well and which inventive market participants are unable to circumvent. The policy rate is a blunt instrument, as it has a broad impact on the economy. But at the same time, this may be a strength compared with macroprudential tools, simply because it is difficult to "circumvent" a policy rate increase.

The inflation expectations are taken from Prospera's survey of market participants Sources: Statistics Sweden and TNS SIFO Prospera  BIS central bankers’ speeches  15  Figure 3. GDP growth Annual percentage change, seasonally-adjusted data 10  10  GDP GDP 1995Mean 2.7  Mean  8  8  6  6  4  4  2  2  0  0  -2  -2 GDP 1971-1994 Mean 1.8  -4  -4  -6  -6  -8  -8 70  75  80  85  90  95  00  05  10  Source: Statistics Sweden  Figure 4. CPI and CPIF Annual percentage change 5  5  CPIF Mean CPI Mean  4  4 CPIF 1995-2012 Mean 1.80  3  3  2  2  1  1  0  0  CPI 1995-2012 Mean 1.44  -1  -1  -2  -2 95  97  99  01  03  05  07  09  11  13  Note: Monthly real-time data, January 1995 – April 2013. Sources: Statistics Sweden and the Riksbank  16  BIS central bankers’ speeches  Figure 5.
Thomas C Baxter, Jr: Too big to fail – expectations and impact of extraordinary government intervention and the role of systemic risk in the financial crisis Testimony by Mr Thomas C Baxter, Jr, Executive Vice President and General Counsel of the Federal Reserve Bank of New York, before the Financial Crisis Inquiry Commission, Washington DC, 1 September 2010. *  *  *  Chairman Angelides, Vice Chairman Thomas, and members of the Commission, thank you for the opportunity to appear before you today. For the past 15 years, I have been privileged to serve as the General Counsel of the Federal Reserve Bank of New York. I welcome the opportunity to speak to you about the events that brought Lehman Brothers to bankruptcy, events that occurred during 2008 when our Nation was in the midst of the worst financial crisis it has experienced since the Great Depression. During the crisis, Federal Reserve policymakers needed to respond to a series of extraordinary and hugely consequential problems, usually with little time and imperfect information. Today I will be speaking to you about the facts surrounding one of these problems, Lehman Brothers. In 2008, my job was to provide legal advice to Federal Reserve policymakers, and so while I am happy to share with the Commission my recollections of the events that I will describe, I do not want to exaggerate my own importance.

Second, as a contingency, should the banking organizations fail to come up with a workable rescue plan, they should present an alternative plan to address the effects of a Lehman bankruptcy, because they should anticipate that would happen Monday morning. As was the case with Bear Stearns, the Government knew that a third party would have to finance a portfolio of Lehman’s illiquid assets in order to make Lehman acceptable as a merger partner. In this case, drawing upon the precedent of the rescue of Long Term Capital Management in 1998, the Government arranged for a consortium of private banks to provide the financing. And in fact, after much discussion and some disagreeable moments, the private banks agreed to do so. By Sunday, September 14, the counterparties had agreed to finance approximately $ billion of Lehman’s illiquid assets in order to facilitate Lehman’s rescue. While the structure was never finalized, it would presumably have resembled a private sector version of Maiden Lane LLC, the vehicle used to acquire the assets from Bear Stearns. The banks would have lent $ billion to their SPV, and the special purpose vehicle (SPV) would have purchased largely real estate-related assets from Lehman. This would have made Lehman more attractive to a potential acquirer. Lining up financing for the illiquid assets was a necessary condition for a rescue, but it was not sufficient. The sine qua non of the plan, as Secretary Geithner and others have pointed out, was a willing and capable merger partner.
Several countries have already gone down this route, including China in 2013 and Russia in 2017. A third option, and the one that has so far been the preferred  response in Europe and France to innovations with the potential to change the payment services market, is to establish appropriate regulations that make it possible to reconcile two key imperatives: 3/5  BIS central bankers' speeches  First, address the risks that I mentioned, notably with a view to ensuring an adequate level of protection for participants, whether they be investors or consumers. Second, preserve the potential for technological innovation offered by crypto-assets. These two imperatives are mutually beneficial. Adopting a framework that protects  participants in the real economy will help to increase their confidence in the mechanisms associated with crypto-assets, thereby promoting growth in the new assets. 1. If we opt for creating a regulatory framework, what should go into it? That is precisely the topic of a number of debates currently being conducted around France’s new PACTE Bill. The proposed legislation includes an approach to crypto-assets based on two pillars. The first specifically addresses the question of ICOs, proposing an optional labelling system. Under this system, a company planning an ICO would be able to ask the AMF to label the offering. This optional label would give the offering greater credibility and reassure potential token buyers about the serious nature of the project and the associated financing arrangements. The second pillar concerns providers of crypto-asset services.

Uncertainty over the future of crypto-assets in the world of payments does not relieve us of the need to regulate their development, given the attendant risks. Adopting a framework that  protects participants in the real economy will help to increase their confidence in the mechanisms associated with crypto-assets, thereby promoting growth in the new assets. The intrinsically digital and global nature of crypto-assets means however that a coordinated international approach must be taken to avoid creating an opportunity effect, because experience tells us that participants can easily relocate to another territory offering more flexible laws. Several international organisations have set up working groups to explore this question, under the leadership of the G20. While some of the discussions are still in their infancy, the aim in the medium term is to come up with a framework and an international code of conduct to preserve security for everyone and promote financial stability, which is a common good that we all share. Thank you for your attention. 5/5  BIS central bankers' speeches