samchain/econo-pairs-v1 huggingface dataset:
Don Kohn14 argues that “more is not necessarily always better, and at each step of the way central banks have needed to take account of the potential costs as well as the benefits of greater transparency”. In particular it is argued that the publication of some kinds of information could make it more difficult for policymakers to do their job, with discussions of the possible path of future interest rates being seen as particularly hazardous, if they appear “as a firmer pre commitment than they were intended to be”.15 Arguably these should not be a first order issues for central banks with a transparent inflation targeting framework. The objectives of policy are clear, and outside commentators should have access to enough information to work out the future direction of rates for themselves. Nevertheless there has been a closely related debate about how transparent an inflation targeting central bank should be about the interest rates on which its forecasts are based. An obvious reason for wanting more direct information about the ‘preferred’ path is to get direct evidence on the interest rate strategy. (How quickly will rates rise? What are the advantages of a ‘wait-and-see’ approach?) 13  As Mishkin puts it ‘. [H]aving secretive central banks is inherently undemocratic…[B]asic democratic principles require that the central bank be accountable for its actions: this requires that the public understands what the central bank is doing.

To be sure, there have been times when differences of view about the central projection have been too significant to be handled within the ambit of the fan chart and on those (few) occasions the Inflation Report has included material illustrating the minority view. But, as the MPC’s preface to the Inflation Report notes, the fan charts reflect the Committee’s best collective judgement about the most likely paths for output and inflation and the uncertainties surrounding the central projections, while recognising that members may have slightly different views about the underlying assumptions. Forecasts and interest rate decisions How influential is the forecasting process when it comes to the actual business of taking decisions about interest rates? One yardstick might be whether the MPC is more likely to change rates in Inflation Report months. There is no necessary reason why this should be so: information accrues relatively evenly over the year, and the Committee goes through the same decision taking process every month. On the other hand, the MPC might be more likely to change rates after a systematic and full review of the inflation outlook, rather than in response to the news on the month. On this argument, ready-reckoners may give a rough indication of what the impact of new data may be, but they are no substitute for a full analysis. So in non-Inflation Report months the MPC may sometimes decide to ‘wait-and-see’ – to postpone a possible interest rate change until more evidence has accumulated.
Second, in countries where formal wage indexation has declined sharply during the crisis, the pass-through of headline inflation to wages may have weakened. Third, that pass-through also depends in part on labour market slack, since in an environment of high unemployment trade unions may be prepared to prioritise job security over some loss in real wages. In short, for the time being there are grounds for being cautious when assessing the durability of the inflation outlook. For us to be confident that inflation will indeed stabilise around our aim, we would need to see clear evidence that underutilised resources are declining and feeding through more convincingly into domestic price formation. For that, it is clear that continued support for demand remains key. And this provides the answer to the third criterion: we are not yet at a stage when inflation dynamics can be self-sustaining without monetary policy support. The recovery of inflation still depends on the very favourable financing conditions that firms and households enjoy, which in turn depends on the substantial degree of monetary policy accommodation we have in place today. Accordingly, our inflation projections still include a material contribution from monetary policy over the next two years. For this reason the Governing Council at its last meeting confirmed the appropriateness of the current very accommodative monetary policy stance. The monetary policy stance is still appropriate Yet it is important to understand that our stance is no longer determined by just one tool, policy interest rates.

A number of processes, such as those concerning government finances, are being modified. But this is accompanied by an increased need to discuss issues raised by the fact of monetary union. Now that the countries which will be participating initially in monetary union have been singled out, moreover, an informal group - the Euro 11 Group - is being set up for discussions among the ministers of finance and economy in the euro area. The idea is that this group will concentrate on matters that concern just the participating countries and cater to the greater need for dialogue and cooperation that they perceive in connection with the inception of monetary union. However, this is not a decision-making body and all matters considered by Euro 11 are prepared by the Monetary Committee, in which all fifteen EU Member States are represented. The crucial institutional change is, of course, that as of next year the conduct of monetary policy will be fully centralised. The Treaty explicitly states that the ECB is not to be swayed by political considerations; its task is to concentrate on monetary policy. But naturally a dialogue will be needed with the governments in the EU and euro areas, in the first place with the ministers of finance and economy. The Treaty actually provides for this in that the Ecofin president may participate in meetings of the ECB Governing Council and even submit motions. Moreover, representatives of the NCBs and finance ministries will continue to meet in the Economic and Financial Committee.
I will also offer my opinion on how other economic policy should make a consistent contribution, so that we can chart a course through these uncertain times towards prosperity and opportunity. 1. Euro area: situation and outlook A succession of adverse shocks, including that triggered by Russia's invasion of Ukraine, have rocked the global and, naturally, the European economy. Indeed, given our geographical proximity to the war zone, our close trade and financial ties to Russia and our high dependence on fossil fuel imports from that country, the euro area economy has been one of the hardest hit by the war. The war has sent the prices of energy and other commodities soaring. As these are products that the euro area does not have at its disposal and needs to import, this has led to a significant deterioration in our terms of trade of around 2 percentage points (pp) of (nominal) GDP to 2022 Q3. Moreover, this shock has unfolded amid sky-rocketing global inflation, which has reached levels not seen in several decades and is prompting sharp falls in real income. The reasons behind the rise in inflation are manifold and combine supply and demandside factors, whose weights differ depending on the geographical area in question. In  1/8  BIS - Central bankers' speeches  the case of the euro area, higher energy and food prices have added to the effect of other supply-side factors related in particular to supply-chain disruptions.

We may not yet have seen the full effects on the krone exchange rate of the interest rate reductions that have been implemented. At the same time, the krone can be influenced by fiscal policy and the outlook for wage growth. Norges Bank’s Executive Board sets the interest rate with a view to achieving the inflation target of 2½ per cent. The inflation target is also a vehicle for monetary policy’s contribution to stabilising output and employment. When setting the interest rate, the Executive Board seeks to achieve a balance. The objective of stimulating growth in the Norwegian economy and achieving the inflation target is weighed against the risk of new pressures building up in the economy over the long term. Since December 2002, we have judged that to achieve this balance it was appropriate to reduce the interest rate to a low level. At the last monetary policy meeting on 13 August, it was decided to reduce the interest rate to 3.0 per cent. With an interest rate of 3.0 per cent, the Executive Board’s assessment remained unchanged, i.e. that the probability that inflation two years ahead will be lower than 2½ per cent is greater than the probability that it will be higher. Thank you for your attention. BIS Review 38/2003  5
Surveillance and crisis prevention  Let first me turn to crisis prevention. I shall start with a general remark. Surveillance is the backbone of crisis prevention. However, for surveillance to be effective, it must not only be correct, it must also be implemented. Implementing stability-oriented policies and efficiently monitoring domestic markets and institutions is the primary responsibility of the member country. The Fund can only help countries that are willing to help themselves. As any Argentinean would say, it takes two to tango. The Fund’s role is limited to providing the best possible objective advice built upon the best possible analytical expertise. This is not to say, of course, that Fund advice is always correct or appropriate. Though Fund staff is highly qualified, it can make mistakes. Indeed, mistakes have been made most often due to a poor understanding of the country-specific circumstances. It is therefore crucial to maintain a high-quality dialogue between authorities and staff at all times. The more the interaction between a country and the Fund is frank, constructive and based on mutual trust, the bigger the chances are of a valuable and usable outcome. Though Switzerland joined the IMF in 1992 only, we can already record some very good experiences in this regard. Most appreciated, for instance, were the discussions that took place between our experts at the Swiss National Bank and Fund staff in the period of the formulation of the new monetary concept that was introduced in 2000.

Under the circumstances, it should come as no surprise that Switzerland fully supports the IMF in attaching the highest priority to stability and crisis prevention. The main tool in this endeavour is clearly surveillance. Surveillance remains the most important activity of the Fund as its first line of defense against turmoil. However, this activity is hardly known to the wider public. Unlike an agreement on a multi-billion rescue package, efforts to prevent a financial crisis never hit the headlines. Surveillance is relatively unknown, probably also because it is a very complex animal, hard to explain, and with dozens of connotations. I have neither the time nor the desire to elaborate on all the elements of present-day Fund surveillance. However I believe that some points are worth emphasizing. In the first part of my presentation I shall begin with some remarks on transparency, both in the context of the Fund and with regard to its role in promoting market discipline. I shall then elaborate a bit on surveillance in financial markets. In the second part of my presentation, I shall take up issues linked to crisis resolution. However, much effort goes into crisis prevention, crises cannot be completely ruled out in an open and dynamic global economy; the IMF, therefore, needs to be and to remain an efficient “fire-fighter”. I shall elaborate on this “fire fighter” role of the Fund, on the limits of its action, and on what is necessary to preserve efficiency and credibility in this context. BIS Review 69/2004  1  2.
May be, one of the reasons as to why we remain under-developed while developed countries progress faster, may be because of our shortage of human capital, with specific and adequate financial insights and awareness. If this situation is to be rectified, we need to develop well financially-educated people to operate financial institutions. We need well trained people to regulate these institutions. We need the investors to master the art of investment. All in all, we need our future generations to acquire sufficient financial knowledge. At the same time, I hope the knowledge that would be disseminated by this newly formed FSA would, also be valuable to change the attitudes of our financial journalists as well. In that regard, I hope that some of these courses may provide opportunities for our journalists too, to better understand financial service related subjects so that they will be able to provide a more meaningful interpretation of such matters. That too would, hopefully, enhance the general public’s understanding of financial operations and I look forward to such an outcome as well. As we all know there is today a vast majority of people who lack the knowledge to take advantage of the enormous opportunities that may be actually right in front of them. I think we have now taken the initiative to rectify that situation.

Ajith Nivard Cabraal: Overview of financial and economic developments in Sri Lanka Keynote address by Mr Ajith Nivard Cabraal, Governor of the Central Bank of Sri Lanka, at the Opening of the Financial Services Academy at the Centre for Banking Studies, Rajagiriya, 5 March 2007. *  *  *  Ladies and Gentlemen: Today we all have gathered here to witness an important step towards the development of the financial landscape and knowledge pool of the country, the establishment of the Financial Services Academy, a landmark organization that we hope, would shape the future of our financial services industry. As we know, the Sri Lankan economy recorded a growth of 7.8 per cent in the first three quarters of 2006 and according to current available data, it is very likely that the economic growth in 2006 would be well over 7 per cent. This will be the highest since 1978. Towards such growth, the contribution of the services sector was easily the highest and of such high growth sector, the growth in financial services was highly significant. It is therefore widely acknowledged that the contribution of the financial sector for the achievement of growth of the country is enormous, and whatever we do in that connection, would be of overall immense value. The developments in the financial sector also helps the economic growth through several other channels as well: It improves the efficiency of business processes, attracts investment, reduces unemployment and enhances access to finance, to name a few.
The distinguishing characteristic of bail-in, as a resolution tool, is that it applies losses upfront based upon a valuation rather than at the end of a liquidation of assets. As such, it prospectively avoids an unnecessary destruction of value. For those groups that issue debt from the holding company and downstream the proceeds to operating subsidiaries, it should be possible to bail in debt at the holding company and recapitalise distressed parts of the group. Where necessary, those distressed subsidiaries could be recapitalised by bailing-in – ie writing down and/or converting into equity – intergroup debt owed to the parent. The host authorities of those operating companies should in principle be prepared to go along with that kind of operation provided that the home country engenders the necessary trust and takes account of the need to maintain stability around the world not just in its immediate neighbourhood. Deposit insurance schemes and bail-in: multiple point of entry resolution We should not, however, assume a monolithic approach to resolution. It is not a case of one size fits all. What I have described could work for banking groups that issue plenty of debt out of a top company. It would not work so easily for groups operating commercial banks around the world that are funded to a very large extent from insured deposits. In a hypothetical extreme case, if they haven’t issued bonds, then there would be no bond holders to bail in.

More relevant to today’s conference, following the FSB’s recent Plenary meeting in Tokyo we announced that in the next few weeks we will issue a consultative paper on resolution planning and, in particular, on resolution strategies. The paper, drawn up by a subcommittee led by Christine Cumming of the New York Federal Reserve Bank, will cover three areas. The first is Recovery Triggers and Stress Scenarios used in recovery planning. Firms need to ensure that triggers are not linked mechanically to metrics that lag behind their true financial condition – a problem with some previous earlyintervention frameworks. Recovery actions must start sufficiently early. But care must be taken to avoid markets overacting to the fact of such actions being taken. That is not easy. Second, the consultative paper will outline a possible framework for national authorities to use when identifying the critical functions and support services of firms that need to be sustained in distressed conditions. What matters here is focusing on those services that are vital to the economy. The third, and most important, area of consultation is about the development of Resolution Strategies and Operational Resolution Plans. This guidance aims to capture the main issues that authorities should address.
At the same time, the forecast based on the market’s assessment of the future repo rate shows that there didn’t have to be any hurry to begin to hike rates. A repo rate path consistent with implied forward rates led in this example to inflation never reaching the target. Examples like this can of course never give an exact answer to when the repo rate should be adjusted. What they can do is increase our understanding about the consequences of different options. In this case they can help us to narrow down a number of reasonable scenarios for policy a few quarters ahead. And in this particular example an unchanged repo rate was certainly one such reasonable option for a period. Allow me for safety’s sake to emphasise that the conclusions for monetary policy of both the alternative forecasts – the Inflation Report’s usual main scenario and the estimates based on implied forward rates – can generally be expected to be the same. Regardless of whether we reason on the basis of the simple policy rule, which relates the forecast of inflation one to two years ahead – under the assumption that the repo rate is held constant – to the current decision, or whether we study forecasts based on implied forward rates, for example, we can reach the conclusion that it was reasonable to leave the repo rate unchanged in December and that the repo rate sooner or later will need to be raised.

None of these arguments in themselves were the key factor in deciding to leave the repo rate unchanged, but taken together they indicated nevertheless the need for a certain measure of caution. In this kind of situation it can be interesting to consider how different future paths for the interest rate can be expected to affect both the real economy and inflation. Figure 6 shows resource utilisation in two different cases: one based on an unchanged repo rate and another on the implied forward rates that applied during the autumn. At that time the implied forward rates were indicating that the repo rate would be raised very shortly and that it would then rise to levels around 4.5 per cent in the longer term. Resource utilisation picks up in both cases, turning positive after about a year. But if the repo rate is raised according to the implied forward rate at the time, resource utilisation drops, turning negative again during 2007, whereas it remains positive throughout the whole period covered by the example if the rate is held constant. The situation also differs somewhat between the two alternatives when it comes to inflation (see Figure 7). With last autumn’s implied forward rate, inflation never reaches the inflation target, while, with an unchanged repo rate, it can be expected to overshoot the target just beyond the traditional two-year horizon. What this example illustrates is that an unchanged repo rate entailed a continued rise in resource utilisation, which in turn drove up inflationary pressures beyond the two-year horizon.
Measures taken by Bank Negara Malaysia to promote financial inclusion Since its inception in 1959, getting the public to have access to financial services has always been a focus area for Bank Negara Malaysia. In the Central Bank of Malaysia Act 2009, financial inclusion has also been legislated as one of Bank Negara Malaysia’s primary functions. Bank Negara Malaysia has designed the development of a diversified financial system which meets the needs of various consumers and businesses. Many efforts were implemented. For example, to facilitate ease of access to bank accounts, Bank Negara Malaysia has introduced basic banking service, a no frills and low cost savings account. On the financing side, the Pembiayaan Mikro framework was established in 2006 to facilitate the provision of uncollateralised micro financing by financial institutions in a fast, easy and convenient manner. The Central Bank has also focused on strengthening the enabling infrastructure through the establishment of the Credit Guarantee Corporation (CGC) to provide credit guarantees to enable SMEs with limited collateral and track record to have access to financing. Since its establishment in 1972, CGC has assisted more than 417,000 SMEs to obtain financing amounting to about RM50 billion. To facilitate financial institutions in their lending decisions, the Central Credit Reference Information System (CCRIS) and the Credit Bureau Malaysia were also established to gather credit history from borrowers within and beyond the regulated financial sector, respectively.

I believe this is one of the major structural reforms in the Turkish economy, especially in terms of its effects on inflation. Of course, independence is not a concept that can be achieved via the implementation of law alone. It is a concept that policy practices have a great influence upon. Dear participants, Having mentioned the two milestones in the notion of central banking, I’d now like to continue with the challenges of central banking in emerging economies combined with the Turkish experience in terms of monetary policy implementations. Although objective functions are similar in financially liberalized and well-functioning market economies, the transmission of monetary policy actions on economies certainly differs between industrialized countries and emerging market economies. Accordingly, there is a wide range of views among economists on how monetary policy decisions influence economies. If we add the uncertainties faced by the internal dynamics of emerging market economies to the picture, the impact of decisions taken by central banks might differ from one country to another both in terms of the nature and the time and even from one period of time to another for the same country. First, it is important to note that in the design and implementation of monetary policy, the understanding of structural changes is essential since the impacts of monetary policy decisions in a given economy depend on its structural changes and macroeconomic environment 2 . On the other hand, it is clear that emerging economies like Turkey are subject to structural changes more frequently than any other developed economy.