samchain/econo-pairs-v1 huggingface dataset:
If that had meant a deeper recession, deflation and an even longer-lasting malaise in the economy, then very few UK-based medium-term investors would have been better off as demand and activity would have dropped off further, credit risk crystallised and a range of credit investments went bad. Those with longer term investment horizons – such as everyone in this room should have – will appreciate that the best outcome for UK monetary policy is for it to be set at the right level to lay the foundations for a stable economy. In that regard, we should bear in mind that the economy will always be subject to unforeseen shocks which tend to push it away from stability for a period of time. The job of the MPC is to  3  With such a large change in the nominal exchange rate, one only needs to be slightly out in estimating the marginal impact to generate large errors in the total impact. 2  BIS central bankers’ speeches  react to those shocks by bringing inflation back to target and, subject to that primary objective, in a manner which helps sustain output and employment. As well as inflation back around target, we have also seen a resurgence in growth over the past year. It was difficult to explain the suddenness of the change in sentiment which accompanied the recovery during 2013 but growth in itself should not be regarded as surprising. It is the near stagnation from 2010–12 which was harder to understand.

The recognition of these different short-run trade-offs, depending on the forces driving inflation, lie right behind the specification of the Remit we have been given by the Government. The fact that inflation has now returned to target confirms to me that we were broadly correct in our underlying assessment that the factors pushing up on inflation would be temporary, although the near-term path for inflation hasn’t always been what we expected. It is very difficult to anticipate the precise trajectory of prices and we have certainly learned more about the dynamics of inflation during this difficult period: the effects of the 25% depreciation in the sterling effective exchange rate between mid-2007 and early 2009 were larger and longer-lasting than we anticipated for example3. But tightening policy in response would have been a major mistake: a tighter policy then and we could now be facing the threat of deflation and depression, rather than inflation around target and the prospect of real recovery. The MPC’s policy has been to keep short-term interest rates low, by setting Bank Rate at 0.5%, and to stimulate the economy through asset purchases and latterly through forward guidance. Although asset purchases work through several channels, I want to spend a little time on their contribution to depressing longer-term interest rates. Low interest rates – at all maturities – have been necessary to help stimulate spending and so help set the conditions for a recovery in the economy.
This evidence suggests it is far better to be born rich and stupid than bright and poor. Moreover, these early-stage differences in educational attainment, shaped by socio-economic background, have a life-long impact. That is why there is a very high degree of intergenerational persistence in incomes and wealth, even once account is taken of ability. As one diagnostic on that, consider the following evidence, courtesy of the Commission on Social Mobility and Child Poverty: although independent schools comprise only 7% of pupils in the UK, the independently-educated comprise over 70% of the upper echelons of the judiciary, 55% of permanent secretaries in the civil service and 62% of senior armed forces officers. 70 Branching of the opportunity tree starts early, it appears, and then keeps widening. At present, as with cognitive diversity, there is often a lack of recognition of these inbuilt socioeconomic biases. And, as with cognitive diversity, one reason for this lack of recognition is a lack of measurement. There is no agreed set of metrics for measuring someone’s socioeconomic background. In the UK, the Social Mobility and Child Poverty Commission has begun to develop some metrics. But there is widespread recognition that we are still in the early stages of measurement. Measurement would enable organisations to draw their own experiential diversity maps. As with cognitive diversity, beyond that there is potentially value in making transparent those maps to provide incentives for purposive action if experiential diversity is found to be wanting.

A number of other countries have committed to a new, global standard ISO20022; in the UK the Bank of England and Pay.UK have committed to introduce it for CHAPS and Pay.UK’s retail payment systems, via the introduction of the Common Credit Message, helping to integrate a common language for global payments data in the UK’s payment systems16. I’m sure many of you recognise the ISO20022 from the ECB’s Target2-Securities and Target Instant Payment Settlement17 . In doing this the Bank has also committed to making Legal Entity Identifiers a mandatory component of its financial institution to financial institution CHAPS messages, and can see great value in also extending use of Legal Entity Identifiers (LEI) to a wider range of transactions in the longer term. I’m sure many of you are familiar with the LEI, as part of MiFID II transaction reporting. As well as being a valuable financial reporting tool, we believe the LEI could be a building block for further innovation, delivering wider economic benefits for end users of financial services – increased usage could raise efficiency, competition and productivity18. As well as the benefits that come with international harmonisation, greater flexibility, and richer payments data, there are gains to be had for system-wide resilience. Using the same messaging standard across many payment systems will help to facilitate the re-routing of payment messages, reducing the impact of system outages.
However, due to the pace of the recovery, disruptions and bottlenecks in production chains caused by anti-pandemic restrictions, shifts in the structure of final demand from services towards products, a number of industries faced a situation when the expansion of demand surpassed their potential to ramp up output. This involves not only a shortage of production capacities, but also of labour resources. Among other reasons, this was caused by restrictions on the inflow of labour migrants and a larger number of employees who are on the sick leave 1/4  BIS central bankers' speeches  or in self-isolation. Although many of the factors fuelling inflation this year are due to supply issues, this is the expansion of demand which makes it possible for companies to simultaneously and fully pass their increased costs on to output prices and build up their output. No less important is the fact that higher inflation expectations also boost demand, especially for durable goods. In the middle of this year, households’ and businesses’ inflation expectations in Russia rose to their five-year highs. When the expectations regarding future inflation are elevated, households have a lower propensity to save and rather prefer to spend more for current consumption. Moreover, as interest rates are low, households opt to invest in higher-risk securities market instruments, rather than deposit their savings. Companies tend to revise their prices more often. Employees assume that the growth rate of wages will be higher.

The economy will start to recover in 2022 H2, and it will be appropriate to shift towards neutral monetary policy in order to maintain price growth rates in the future. According to the Global Inflation scenario, the acceleration of global inflation will become steadier by 2022. Elevated inflationary pressure and a further rise in inflation expectations will force advanced economies’ central banks to start monetary policy normalisation earlier. In particular, the US Fed might begin to raise its policy rate as early as 2022 Q2. Monetary policy normalisation in advanced economies will cause a decline in external demand and, consequently, a slightly lower growth pace of the Russian economy in 2023–2024, as compared to the baseline scenario. Furthermore, inflation will speed up in 2022, spurred by a rise in Russian companies’ costs and higher inflation expectations. Nonetheless, in 2023– 2024, inflation will edge down closer to 4% due to contracting external demand and a tighter monetary policy than assumed in the baseline scenario. The third alternative considered in the Guidelines this year is the Financial Crisis scenario. Its difference from the Global Inflation scenario is in how financial markets might respond to monetary policy normalisation in the USA. The rebound in the world economy and low rates caused spikes in debt burden, primarily public debt. This process still continues, although at a more moderate pace. It remains to be seen yet whether particular countries are capable of handling this debt burden.
The first task for the Group is to identify the most appropriate near riskfree reference rate for sterling markets. Alongside that you will consider how contracts referencing the rate can be made robust to changes in market structure. We expect these discussions to reach a conclusion during the third quarter of this year. The Group will then develop an adoption and transition plan over the remainder of 2015, considering the factors that could facilitate adoption of the chosen RFR, as well as metrics of success and a timeline for the transition process. It is anticipated that firms participating in the Working Group will sign letters of agreement to support adoption of the chosen RFR, referencing these metrics. Implementation is expected to begin in 2016. We believe that this needs to be a market-driven process and that the choice of RFR is yours to make. However, this is not an academic exercise. A “choice” means that you will be prepared to make meaningful transition commitments over a 12 to 24 month horizon. Bank of England data collection initiative Before I hand over to you all to begin the important work of this Group, I want to make you aware of a new initiative the Bank is embarking on, aimed at enhancing our measures of overnight interest rates in sterling markets. The Bank has a special interest in monitoring the overnight money market because it is a key aim of monetary policy to influence conditions in that market.

The FSB’s recommendation to develop alternative reference rates alongside LIBOR recognises that there are, broadly speaking, two main applications for benchmark interest rates: (i) as reference rates in credit products, including bank loans, thereby helping banks to hedge their unsecured funding costs; and (ii) as reference rates in derivatives contracts, whose users are likely to be seeking to hedge exposure to the general level of interest rates, or to hedge secured funding costs. LIBOR originated as a reference rate for bank loans, and became the dominant reference rate in interest rate swap contracts because it was already the major established reference rate at the time the swap market developed. However market participants’ input to the FSB report suggested that many users of derivatives would prefer not to have exposure to banks’ term funding costs through LIBOR swaps, and would instead prefer those contracts to reference a near risk-free rate. This change will not happen spontaneously – liquidity in long-dated swaps is firmly concentrated in contracts referencing LIBOR and no individual player can change that situation. What is required is a collective effort to change market practice. That is why we have initiated the Working Group on Sterling Risk-Free Reference Rates. It will be tasked with identifying a suitable near risk-free reference rate for sterling markets, and formulating a transition plan to catalyse a change in market practice so that a significant portion of derivatives contracts reference the new RFR rather than LIBOR.
In terms of actual measures – something that Antony also wants me to talk about – I would refer you to the eighty recommendations in the Report of the Focus Group on Financial Services published in January 2007 as Hong Kong's response to the Eleventh FiveYear Plan of the country published in 2006 and as Hong Kong's input to the National Finance Working Meeting in 2007. As you may be aware, the implementation of our overall strategy and many of the detailed recommendations involve the relaxation of controls in the financial systems on the Mainland. While the benefits of financial liberalisation are clear, so are the risks to financial stability, as the Asian financial crisis of 1997-98 and the current turmoil in the developed financial markets demonstrate so vividly. Here there should be a strong emphasis, to quote the Premier again, on gradualism, controllability and the ability to take initiatives at the right time. And in the context of pursuing the complementary, mutually-assisting and interactive relationship between the two financial systems, financial liberalisation should not be seen as helping Hong Kong. We welcome support from the Mainland in discharging our legal responsibility in maintaining the status of Hong Kong as an international financial centre, but I hope I have convinced you that in developing our strategy and our recommendations, we very much have the national interest foremost in our minds.

London, of course, has much of the European economy in addition to the United Kingdom economy. Hong Kong has the Mainland of China, the third largest trading partner, the fourth largest economy, the largest foreign reserve holder and home to participants in the key financial markets that collectively form the largest player in the world. The second point I wish to make is that, under "One Country, Two Systems", there are two financial systems in China, both in a position to serve the interests of the country in the allimportant function of financial intermediation. This is unique and there are no relevant precedents in the financial history of the world. Because of the uniqueness of this arrangement, there is understandably considerable scepticism both internationally and within China on how it might work. Let me tell you. The two financial systems are different in a variety of ways, with the financial system on the Mainland operating in the developing environment of a socialist market economy and the one in Hong Kong operating in the familiar environment of a capitalist free market economy. We all know that where there are  BIS Review 58/2008  1  differences, there are opportunities for exploiting relative strengths, addressing relative weaknesses and maximising synergies between the two systems, remembering always the national interest of making financial intermediation more efficient for the country as a whole. In other words, there is a need to develop a complementary, mutually-assisting and interactive relationship between the two financial systems.
We are in fact already in the process of reviewing the question of whether the HKMA should play a bigger role in consumer issues, and if so what powers and resources we would need for this purpose. It is too soon to say where this will lead, but I stress again that we have no desire to get involved in the regulation of fees and charges. Deposit insurance Let me now turn to the other major plank of our reform package, which is equally, if not more, controversial. I am referring to the proposal to introduce a deposit insurance scheme (“DIS”) in Hong Kong. In a sense, this can be seen as the other side of the coin to deregulation. Increased competition in a deregulated environment may give rise to increased risk and therefore it seems right that we should look again at the arrangements for dealing with banking failure, should it occur. Let me hasten to add that we have no reason to believe that such a failure will occur. The banking system in Hong Kong remains profitable and robust, despite the challenges that it faces. Our system of banking supervision is also generally reckoned to be effective. But banks can still get into difficulties because of risks that supervision may not be able eliminate. There is always the possibility of external shocks or unfounded rumours that may damage confidence in a bank.

For example, the World Business Council for Sustainable Development (WBCSD) has convened or announced “preparer forums” for various sectors and industries: oil and gas; electric utilities; chemicals; 9  All speeches are available online at www.bankofengland.co.uk/news/speeches  9  Looking ahead, the TCFD is currently considering how to:   Provide additional guidance on how to conduct scenario analysis;    Publish business-relevant scenario templates to lower implementation costs; improve understanding and improve comparability; and    Start a work stream on how to roll out these approaches to portfolio measurement to more asset owners. The Bank of England is doing our part by assessing the strategic resilience of the world’s leading financial centre. The Bank will be the first regulator to stress test its financial system against different climate pathways, including the catastrophic business as usual scenario and the ideal—but still challenging— transition to net zero by 2050 consistent with the UK’s legislated objective.17 In response, banks will need to establish how their borrowers are managing current and future climaterelated risks and opportunities. Those assessments will reveal:   Which firms have strategies for the transition to a net zero economy;    Which are gambling on new technologies or government inaction; and    Which haven’t yet thought through the risks and opportunities. The test will help develop and mainstream cutting-edge risk management techniques, and it will make the heart of the global financial system more responsive to changes in the climate and to government climate policies.
Moreover, faster consumption growth is not a given. It will depend, in part, on the pace of employment and wage growth. A downside risk is that wage growth remains subdued, which would undercut consumer spending. And, the trade sector looks likely to remain a drag on growth over the remainder of the year. Although the dollar has depreciated slightly on a broad trade-weighted basis recently, it still is more than 10 percent higher than it was a year ago. Despite the sharp slowdown in growth evident during the first half of the year, we have seen continued job gains and further falls in unemployment so far this year. Consequently, we still seem to be making progress toward our objective of maximum employment in a context of price stability. Today’s payroll and household employment reports indicate that this progress continued into May. Even with a weak month in March, job gains this year have been averaging almost 220,000 per month. The gain in May was even stronger at 280,000 and was widespread across industries. Although the 12-month change in average hourly earnings is still low at 2.3 percent, it is a bit higher than we have seen in recent years. At the same time, there is still some ways to go. The unemployment rate has changed little in the past four months at about 5½ percent, with the levels of part-time workers for economic reasons, and longduration unemployed, remaining elevated.

We as a central bank also vested enormous efforts making many adjustments in data collection, production and communication process that helped us smoothing the pandemics effect on the production and dissemination of statistics. The pandemic in the initial phase tested the resilience of the statistical system, i.e., the ability to continue with timely supply of statistical data. But it also created demand pressures for new data that was not produced by the official statistics. Data on the epidemiological curve became highly needed as they are leading indicator on how the economy will evolve and how economic and social policies should be calibrated. At the same time, there has been growing demand for real-time high-frequency data on the economy, as many of the historical systematic linkages that policy decisions were based on were broken. For instance, we have been intensively using google mobility data during the lockdowns to assess the behaviour of consumers. We have also leveraged on the private sector data for payment card transactions, as an indicator to assess the personal consumption dynamics and its structure. Although highly useful, the abundance of data also poses a challenge for statisticians, as accentuated by the health crisis. As we go further down the road, the need for quick and granular data, for example on the changes of the economic behaviour of the agents, the longer term scarring to the economy, or the impact of the policy actions on economy will be a "must".
In our opinion, this indicates that there is a need for the gradual ending of the anti-crisis program and the development of more targeted preferential programmes. Consumer lending during the pandemic grew at a weaker rate than before that. However, it has now accelerated again and is growing faster than the recovery of households’ income. Thus, we consider it important to monitor risks in order to prevent overheating and dangerous levels of households’ debt burden. The situation with funding is generally calm. The total inflow of customer funds in 2020 was higher than in 2019. But it is obvious that as far as retail and retail liabilities are concerned, the situation is beneficial for the banks. The growth of household deposits in the past year nearly halved compared to 2019. This is the result of an outflow in the spring months, when people, due to the uncertainty of the situation, withdrew and transferred money into cash. It was also due to a steady growth in demand for alternative investments (such as real estate, stock assets) on the back of decreasing deposit rates. In this regard, people can count, and they are right: the weighted average interest rate on ruble deposits dropped at the beginning of last year from 5.5% to 4.2% at the end of the year and remained at this level. We have only just seen a slight rise in rates. The maximum interest rate on deposits at the 10 largest banks is now somewhere close to 5% (4.93%).

It allowed banks to gradually (those without a business model yet) exit the market in a civilized manner. However, some did find their business model. Indeed, we believe that over half of banks with a basic license have viable business strategies. But nevertheless, we are ready to look further and enter into a dialogue with you. We are also going to discuss the topic of ecosystems in detail at the International Financial Congress. So far, we have published one report that deals with general approaches to ecosystems, but we are now preparing a second one, which will deal specifically with proposals for changing banking regulation and will refer to those banks that are developing ecosystems. Because in our opinion this requires that we take into account all the nuances associated with the risks linked with customer relationships. In conclusion, I would like to say that, in our opinion, bank financing remains and will remain the primary way of raising debt in Russia for many years to come. We are interested in the banking sector enjoying long-term sustainability and profitability. We want banks to be able to meet the needs of the economy in any situation. In the crisis we underwent last year, we saw that banks are able to do so. And in periods of growth as there is now. I wish you every success. Thank you for your attention! 5/5  BIS central bankers' speeches