samchain/econo-pairs-v1 huggingface dataset:
People worry about price moves; a rise will boost emotions although today’s puzzle lies with prices’ stubbornness to stay too low for so long. But money loss gives them more shivers, pushing most into dire straits when that risk materialises. In an emotional and fretful  environment, any message about the safety of our pockets – the essence of financial stability – may be easily distorted, thereby fanning fears. Sometimes, central bankers’ talk seems too strong, on other occasions too vague for both markets and the public at large. Confronting volatility, uncertainties, mistrust or even panic and scepticism only via the monetary toolkit is not enough. Central bankers are struggling to address some of these issues, to make them understood by using all the modern and persuasive communication methods or tools. Nevertheless, their effort is poorly matched by the fiscal policy and by the often delayed structural reforms. In our case, as the global financial crisis unfolded, it took a while until the loss of confidence in the main actors of the financial industry filtered in to also affect the National Bank of Romania. Thus, a few years ago, the public perceptions started to be influenced by local fake-news  campaigns echoing the ‘post-truth era’ that pointed to the NBR as being ‘the banks’ lawyer’.

Indeed, an even stronger version of this argument is that the very success of the regime contributed to the decline in market participants’ perception of risk and encouraged them in the leveraged acquisition of risky assets. According to this view, the MPC ought to put independent weight on credit and asset price developments and should have kept policy tighter during the years leading up to the crisis. That would have generated an undershoot of the inflation target in the near term but reduced the likelihood of a disruptive unwinding of the financial imbalances further out. The first point to make is that interest rates affect the whole economy through a variety of channels. Raising Bank Rate in order to curb a credit boom would be fine if that credit boom was also associated with excessive demand growth and overheating in the real economy. But that, by and large, was not the case during the years leading up to the financial crisis. Raising interest rates enough to have had a material impact on the credit boom would most likely have resulted in an even higher value of sterling, markedly weaker activity and higher unemployment. Would businessmen, households and Parliament have accepted this as a price worth paying to bring down credit growth with the hope of forestalling a hypothetical future financial crisis? I suspect the answer to this would be No, even though equipped with 20/20 hindsight we might take a different view.
In addition, the new regulatory changes, both prudential and resolution policy-related, require not only the availability of ample capital levels but also, moreover, of other liabilities-side instruments able to be converted into capital if needed. Taking advantage of the foreseeable improvement in economic conditions to raise the return on equity, while responding to new regulatory requirements, is a notable challenge for the financial system. 3  4  Note that this figure does not include the sale of shares of Bankia by BFA (100%-held by the FROB) in February – accounting for 7.5% of capital, at the price of € per share – insofar as the liquidity obtained remains in the selling institution and is not therefore a refund of assistance until BFA’s capital is amortised. BIS central bankers’ speeches  The path pursued by the sector as a whole – to contain financial and operating expenses while combining diversification with the harnessing of competitive advantages and moderating dividend pay-outs and remuneration – is an appropriate one for adjusting to the new competitive, regulatory and supervisory environment within the framework of the SSM. Turning to what are essentially institutional matters, several challenges remain. I would like to indicate three of these. First, to conclude the reform of the Spanish banking sector, it is necessary to complete the adaptation of savings banks to the new arrangements stipulated in Law 26/2013 of 27 December 2013 on savings banks and bank foundations.

François Villeroy de Galhau: What responses to terms of trade shocks in poor and vulnerable countries? Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Bank of France-FERDI (Fondation pour les Etudes et Recherches sur le Développement International) conference, Paris, 24 January 2017. * * * Good morning and welcome to all in the auditorium of the Banque de France. It is a great pleasure to welcome you here with Patrick Guillaumont, President of FERDI and coorganiser of this conference, to whom I extend my warmest greetings. I would also like to welcome Jan Gunning, Professor Emeritus at the Free University of Amsterdam, as well as all the speakers who honour us with their presence. The Banque de France has established research partnerships with several foundations and universities: the Paris School of Economics, the Toulouse School of Economics and the Fondation nationale des Sciences politiques. The partnership with FERDI (Fondation pour les études et recherches sur le développement international), which we are pleased about, focuses on extending and enriching discussions and research on monetary and financial issues related to development, including: the financing of development, in particular the mobilisation of domestic and international savings, the competitiveness of African countries and exchange regimes and strategies, regional integration in Africa, which was the theme of our first conference in 2014, the “curse” of commodities in low-income countries, and the management of the Dutch syndrome and the terms of trade cycles, i.e.
Over the past few months, CPI accommodation costs were boosted by an unexpected surge in the number of tenancy contract renewals at current higher rental rates. This resetting of old rental contracts could persist into the second half of this year. We therefore expect accommodation costs to impact CPI inflation more strongly than previously. Second, private transport costs. COE premiums have risen faster than expected, reflecting rising incomes and sharp cuts in COE quota to its lowest in more than a decade. This uptick in headline inflation should be seen in perspective. A better measure of underlying price pressures in economy is MAS’ measure of core inflation. Core inflation excludes private road transport and accommodation costs, as these items are subject to short-term fluctuations. These items also do not affect the day-to-day outlay of most Singaporean households. Core inflation is the measure MAS monitors most closely, among a range of indicators. Compared to headline inflation, core inflation was much lower at 2.2% in April and May. This reflects in part MAS’ pre-emptive tightening of monetary policy in April and October last year, which has helped to dampen some cost increases. A stronger Sing Dollar has helped, not just by filtering oil and food price increases, but also by providing a restraining effect on the economy. The strong exchange rate has capped upward pressure on prices. For the whole of 2011, the projection for MAS’ core inflation remains unchanged at 2–3%. This is not to suggest we are entirely satisfied with the inflation situation.

By early 2016 mortgage debt to income ratio had dropped to 97%. It remained around that level until Covid, due in large part to house prices growing more in line with earnings. I should make clear here that London – and to a lesser extent the South and East – was very much an outlier during this period (Chart 1). For example, in London, house prices increased by 35% and the house price-toearnings ratio rose by 200 percentage points. The market in London was probably driven by the sheer weight of demand given employment patterns. But investor flows – including from abroad – and migration may have also played a role. Nationally, however, the picture over this period is of a less active market more in line with economic growth and with households staying longer between house moves. A simple thought experiment illustrates the unusual and quiet nature of the market for the UK as a whole over this period. In Chart 2, the blue line shows the flow of new mortgage borrowing since 2000. After rising through the first half of the decade, new lending drops of dramatically during the financial crisis. The red line shows what the flow of borrowing would have looked like, if, taking house prices at their outturn levels, mortgage transactions had levelled off at their financial crisis peak rather than falling back.
My argument is that the uncertainties today are a return to normality after two years of exceptional predictability in monetary policy both in the UK and elsewhere. A particular area of uncertainty at present is in the credit markets. The dangers of combining a traditional credit cycle with the new derivatives markets have emerged in the US sub prime sector. The US housing market is in its downswing and there are some signs that the same is true in the UK of unsecured credit and commercial property. The position of the bigger UK sectors is less clear cut. The shift in pension fund priorities and the growth of sovereign wealth funds are further clouding the picture. It is our job on the MPC to work through these issues and reach a judgement on them. Our target is to reduce inflation to 2% and keep it there. I can assure you that we will do whatever is needed to achieve that.

Many of the originators were forced into bankruptcy at the start of the year and in the last few weeks we have seen Bear Stearns’ announcement that two of its funds have lost all or nearly all of their investors’ money. I suspect the speed and scale of the changes were outside most stress test simulations. And while the most dramatic changes may have happened there will now be a long period as the implications work through the ratings of other derivatives and the full range of instruments are marked to market. A related lesson is about liquidity in new markets. The worry has been that at times of stress, liquidity would dry up and it would be impossible to trade out of positions. That would not just lock firms into losses but would disrupt strategies which require continuous dynamic hedging – for example, strategies such as constant proportion portfolio insurance (CPPI). Again that has been a feature of recent weeks. It has been widely reported that a couple of the lenders to the BSAM funds put their collateral on the market but were not able to sell as much as they wanted. That is connected to the fourth lesson, the vulnerability of valuations in sophisticated derivatives. These are not widely traded so valuations are usually based not on market prices but on models which draw in turn on correlations established over the recent past. This is a fundamental and unavoidable feature of new products and markets.
The achievement of the overriding policy objective: price stability Confronted with a series of adverse exogenous supply shocks (affecting in particular oil prices, food products and services prices) leading to a rise in the HICP of above 2% in year-on-year terms from 2000 to 2002, the level around which the HICP has hovered since, the Eurosystem has been able to achieve its main objective: since the Eurosystem became responsible for monetary policy in the euro area, HICP inflation has averaged 2%, which is near to the “close to but below 2%” at which we aim over the medium term. Let me remind you that HICP inflation was around 4% in the 1980’s and about 9% in the 1970s [see Figure 1]. Until recently, the single monetary policy also succeeded in stabilising and anchoring medium to longterm inflation expectations at around 1.8% to 1.9%, despite all the above mentioned shocks. That is to say, once again, at a level close to, but below, 2% in accordance with our definition of price stability – whether one takes the inflation expectations derived from surveys (for example, Consensus Forecast, or the ECB survey of professional forecasters – [see Figure 2] ) or those drawn from market data, notably index-linked government bonds. Recently, the awareness of a durable higher cost of oil has pushed expectations slightly above 2%. The last December key ECB interest rate’s hike has however brought these market expectations back to 2% that is to say in line with our definition of price stability over the medium term.

In response to the unfolding crisis, Governments and central banks adopted aggressive measures, including fiscal stimulus packages, bank recapitalisations and the provision of government guarantees, and injections of huge amounts of liquidity. It was also important to critically review the legislative and regulatory framework in order to pre-empt the recurrence of, or at least better manage, similar situations. The de Larosière Report, mandated by the European Commission (EC) and published in February 2009, set the scenario for reforms at a European level. Similar work was undertaken at the global level by the Financial Stability Board (FSB) and by the Basel Committee on Banking Supervision (BCBS). This work has clearly showed that the Basel II capital requirements did not ensure an adequate buffer to sustain an institution on a going concern basis. Confidence in regulatory capital waned and the market started to assess bank robustness using other tools. Liquidity measurement, for example, had been largely excluded from Basel II. Some internal risk models were based on short-term statistical horizons that failed to capture periods of stress. The potential of the regime to exert a strong pro-cyclical bias also became manifest. In its efforts to address identified weaknesses, the BCBS issued two consultation documents in December 2009, one on “Strengthening the resilience of the banking sector” and another on an “International framework for liquidity risk measurement, standards and monitoring”. Concurrently, the EC is proposing amendments to the Capital Requirements Directive (CRD) in order to align it with the recommendations of the BCBS.
One possibility I consider worth testing would be to wait for some months before the Board evaluates the measures comprehensively and publishes more detailed minutes. This, in any event, is a matter to which the Board intends to return later this autumn with the aim of establishing a procedure for preparing these matters and providing information about them in ways that are appropriate to the current exchange rate regime. At the same time, it should be underscored that the arrangements we lay down will not be set in concrete. There must be some latitude for unforeseen circumstances. It is worth mentioning that when the Executive Board came into being in January 1999 and chose to work with public minutes, the interval before they were published was comparatively long, 6 to 8 weeks. Since then it has proved possible to reduce the lag to only a fortnight without giving rise to serious detrimental effects. Conclusion The main message in my address today has been that in the current monetary policy regime the exchange rate ought to be regarded mainly as one of a number of forecast variables. The problem here is that, like other currencies, the Swedish krona is difficult to forecast in the time perspective that is relevant for monetary policy, namely a couple of years ahead. The situation is complicated, moreover, in that the exchange rate is a variable that in certain situations monetary policy can conceivably affect directly. We try to use all the available information in order to arrive at our forecast.

At the same, this conclusion should not be taken too far, so that the tendency is assumed to be permanent. As we have seen, there have been periods when the rate of price increases for imported consumer goods has been held back by other factors than just an altered exchange rate pass-through. In a situation where resource utilisation is high, a weakening of the exchange rate is no longer perceived as transient and favourable one-off effects have ceased to act, the pass-through from exchange rate movements can be larger than what we have observed in recent years. Currency interventions and transparency Before concluding, I would like to say something with reference to the discussion that arose in connection with the Riksbank’s currency interventions in June. First I should underscore that for a number of years now we have taken great pains to be as open and clear about monetary policy as it is possible to be. I have no qualms about claiming that during the past five years we have become one of the world’s most transparent central banks. What we have achieved in this respect is something of a cultural upheaval. The most recent step, in spring 1999, was that we began publishing the minutes of the new Executive Board’s monetary policy meetings. As I have explained in other contexts, transparency and clarity serve several purposes. They can enhance monetary policy’s credibility and legitimacy. They can also make monetary policy more predictable.
Studies by organisations such as the OECD and the IMF point to a clearer connection between long-term growth and the structure of tax and benefit systems than any direct relationship between the tax burden and potential growth. However, this is an area to which Sweden by virtue of its high taxes must pay continued attention. Economic policy must be focused on finding ways to reduce the distortional effects of the tax system, not least as regards people’s willingness to work. High marginal taxes can reduce the motivation to work, thus hampering the economy’s potential growth. This applies particularly when the benefit systems are linked to income. At an individual level, this could mean that someone who is offered a job and at the same time must pay higher tax and receive lower benefits may come to the conclusion that it is more rewarding to remain outside the labour market. This dampens the labour supply and thereby also the economy’s long-term potential growth. Growth issues and particularly the labour supply now appear to be increasingly in the spotlight, which is positive provided that it also lays the foundation for further reform. Having said that, it is pleasing to note that several reforms have been introduced recently with a view to decreasing the distortional effects of the tax system, in particular among low-income groups. This applies perhaps primarily to the steps that have been taken to abolish individual social security contributions, thus reducing marginal taxes among low- and medium-income groups and raising thresholds for state income tax.

The road we have travelled these almost six years has formed an institution which has developed with the challenges it met. It has fine-tuned its processes and its machinery and I think it is well placed to face challenges today and further down the road. |9
There are also signs of the same – excess capacity in some areas, excess demand in others – within the UK economy. And although they’re less startling than in some areas of traded goods, it may take longer, if they persist, to accommodate via matching shifts in supply. It’s these more domestic mismatches we’ll have a look at now. Domestic mismatch and the UK labour market Despite the prevailing lockdown, signs of a recovery in the UK labour market began to appear early this year. Surveys suggest employment stabilised in February. The numbers of unemployed and on furlough peaked at around the same time. Job vacancies, which had actually reached a low during the first lockdown, began to rise sharply. All this seems of a piece. Yet in some ways it’s odd – odd, at least, if you think of employers as identical and employees as a similarly homogeneous group – that vacancies and the use of the furlough scheme should co-exist at all. Imagine the corporate sector was like a single representative firm, selling only one thing and employing people with identical skills and characteristics (whose wages are therefore all the same as well). Why would it choose to create a new job, with all the associated search costs, when it could simply re-employ someone on furlough? Why should unemployment start to fall when there were still around five million people on the CJRS, as was the case in late January? There are always job vacancies in the economy, even when unemployment is quite high.

Ida Wolden Bache: The conduct of monetary policy Introductory statement by Ms Ida Wolden Bache, Governor of Norges Bank (Central Bank of Norway), at the hearing of the Standing Committee on Finance and Economic Affairs of the Storting (Norwegian parliament) in connection with the Storting's deliberations on the Financial Market Report, 9 May 2023. ***  Accompanying charts of the speech Thank you for this opportunity to report on the conduct of monetary policy. When I was here in April last year, Norges Bank had started a gradual normalisation of the policy rate following the coronavirus pandemic. Chart 1: In March 2022, a gradual rise in the policy rate was envisaged The Norwegian economy had recovered after the sharp downturn during the pandemic. High energy prices and a sharp rise in international goods prices had driven up consumer price inflation to a level markedly above the inflation target. Economic activity was strong, and job vacancies were high. Norges Bank expected rising wage growth and higher imported goods inflation to push up inflation through the year, and overall price inflation was projected to be 3.4 percent in 2022. The policy rate was projected to rise towards 2 percent over spring 2023. Chart 2: The policy rate has been raised more than projected a year ago These forecasts were less than accurate. The policy rate has been raised faster and more than projected in March 2022.