samchain/econo-pairs-v1 huggingface dataset:
The third, and most important, question is about inflation. Why has it picked up so sharply over the past year? Are those changes temporary or more persistent? The recent rise in inflation to over 3% does look temporary. The pickup in the months leading up to March this year reflected in part a rise in domestic gas and electricity prices. And the fallback in inflation which has already begun, and which is likely to continue for several months, is in part the result of cuts in domestic gas and electricity prices which have already been announced. Those shocks are relatively easy to identify. But it is much harder to know where inflation would have been without them. Sharp rises in the prices of energy and food have squeezed spending on other goods and services, putting downward pressure on those prices. That is why measures of “core inflation” that strip out certain prices can be highly misleading. Even accounting for the temporary influences, more persistent inflationary pressures have picked up. Some of that stems from the shocks to demand and credit supply that I described earlier. And against that background, expectations of inflation over the next year, on which price and wage decisions are based, have drifted up. That is the third reason why the MPC has raised Bank Rate. Those are the shocks we have spotted. A boost to supply from inward migration has not compensated for a positive shock to both domestic and overseas demand.

The complexity of such a process means it is necessary to design forthwith efficient exit strategies, so that they may be implemented when the time is right. The euro area also shares, albeit to a lesser extent than other zones, these signs of incipient improvement. The latest economic data have been less adverse than expected and the quantitative and qualitative indicators coming to light point to a stabilisation of activity in the very short term which, according to the ECB's projection exercises, will be followed by a presumably slow recovery that will not be free from difficulty. Public finances have deteriorated considerably as a result of the operation of the automatic stabilisers, the discretionary measures to stimulate aggregate demand and action to shore up the financial system. In turn, the financial crisis and the fall-off in activity have severely affected certain European banks, which depend in part on public sector support and which remain subject to a deleveraging process whose scope is still not readily discernible. On the prices front, the risks of deflation have diminished substantially. Although the strong easing in commodities prices until mid-year meant that inflation turned negative, there is a broad consensus, of which the ECB is part, that anticipates inflation will resume positive levels towards the end of the year. Such levels would, however, be moderate for a relatively lengthy period, against a background marked by considerable slackness in productive capacity which will help contain potential inflationary pressures.
The reasons for this could be a combination of unclear communication on our part and a willingness among some market agents to read too much into what was actually said. The more our new policy of not signalling between monetary policy meetings becomes established, the better the communication will work. We Executive Board members will of course assess new information continuously and have instantaneous opinions on where we are heading. All those who make forecasts know that one’s opinion of how the future will look like varies over time. But one day one must put one's foot down. It is mainly the result of this sometimes convoluted process that is the interesting factor, although the journey also has some information value. For us Executive Board members each monetary policy meeting is the final point of one such process and it is not until then that we make our collective assessment. Thank you! BIS Review 111/2007  5  Figure 1. Labour market had tightened Per cent of labour force  12  12 Open unemployment Total unemployment  10  10  8  8  6  6  4  4  2  2  0  0 00  01  02  03  04  05  06  07  08  09  10  Sources: Statistics Sweden and the Riksbank  Note. The broken line refers to the Riksbank’s forecast in MPR 2007:2. Figure 2.

The combination of the Riksbank now publishing its own interest rate forecast and at the same time continuing to report how we think has the potential to change the discussion outside of the Bank. It could to a greater extent concern how new information should affect  2  BIS Review 111/2007  expectations of interest rate developments rather than exactly what formulations are used in for example speeches and press releases. Interest rates are by definition always uncertain Let me take up some issues that are important to keep in mind when formulating forecasts for the repo rate. Firstly, the interest rate path we present is a forecast and forecasts are, as we know, very uncertain. To illustrate this, the Riksbank publishes uncertainty intervals, known as fan charts, around its interest rate forecasts and also its inflation and GDP forecasts (Figure 8). As you see, the uncertainty interval increases considerably in relation to the length of the time horizon. Put simply, the probability of unexpected shocks arising in the economy that would lead to developments deviating from the forecasts increases when the time horizon is longer. In other words, it is not easy to make accurate forecasts of the development of the interest rate in the longer term. One means of illustrating this is to see how the implied forward rates have changed over time. Figure 9 shows implied forward rates measured on a quarterly rate. Expectations of the development of the repo rate have varied substantially over time when measured in this way.
We note that whereas most of our colleagues from Francophone countries are able to speak English fluently, our employees cannot even exchange a simple greeting in French without the aid of an interpreter. As you are well aware, Your Excellency, Zambia has eight neighbouring countries amongst whom, at least, one is French speaking; two are Portuguese speaking and the rest are Anglophone. As neighbours and countries falling under the same sub-regional and regional groupings, we collaborate a lot amongst ourselves on a number of regional cooperation agreements where inability to speak, read or write French or Portuguese is sometimes a major communication barrier. For instance, in Africa Zambia belongs to three regional groupings, namely SADC, COMESA and the African Union (AU). All these groupings include Francophone member states, and, at times, our interests, as a nation, have not been well articulated to our Francophone counterparts in these regional groupings due, in part, to our inability to communicate effectively in French. Further, as I stated earlier, Zambia shares a border with one of the largest and populous country in Africa - the Democratic Republic of the Congo (DRC) - where the official language is French. However, in spite of being neighbour to this huge market, Zambian enterprises have not captured the enormous business opportunities offered by the DRC, largely, on account of their inability to communicate effectively in French. The same also applies to Angola where there is a huge reconstruction programme going on, in which Zambian enterprises could participate.

Notwithstanding the above, the French lessons programme is a very challenging one to our staff in that students are not only required to attend, at least, 90 per cent of class work conducted twice a week for two hours, but are also required to take examinations every ten (10) weeks; implying that only those employees who succeed in the examinations are allowed to proceed to the next advanced level. Your Excellency Following the commencement of the French lessons, I am pleased to inform you that this programme has already started showing encouraging results, as evidenced by the fact that at the end of the first segment of the beginners’ course, all those who took the examinations passed and are progressing to the next stage. The results could have been even better had all the 78 enrolled students attended tuition and taken the examination as scheduled. Let me also clarify here that some employees missed the examinations due to the call of duty and not out of lack of commitment. In this regard, I wish to assure Your Excellency that as a sign of commitment on the part of individual employees and the bank, a crush programme has been put in place to enable those who missed the first examination to sit for it and catch up with the rest of the class by April this year.
Policy changes are assumed to be for a period of 3 years and the effect on GDP is the average fall over that period. Without reciprocity, the CCyB does not increase resilience for 11% of domestic credit assumed to be provided by foreign banks. In addition, one-third of any policy-induced fall in domestic credit is offset by higher credit growth from foreign banks. Charts 4 and 5: International marketable debt flows have increased more quickly than cross-border bank flows Advanced Economies  Emerging Economies  Notes: Pink lines show cross-border loans and deposits from all BIS-reporting banking systems to residents in advanced or emerging economies. The blue lines show amounts outstanding of international debt securities. For advanced economies, the blue line counts issuance outside the market where the borrower resides, and in the case of emerging economies the blue line counts issuance outside the market where the parent company resides. Sources: Hoggarth et al (forthcoming), IMF World Economic Outlook, BIS International Banking and Debt Securities and Bank of England calculations. Chart 6: Portfolios flows to emerging markets have been as volatile as bank flows  Note: The charts show the cross-country median of the standard deviation of gross capital inflows (as a % of GDP) divided by the average size of capital flows. Sources: Hoggarth et al (forthcoming), IMF International Financial Statistics and IMF World Economic Outlook (for GDP data).

But I believe there are tools better suited to make the financial system more robust and I want to consider one of them – capital requirements – and how they might in future interact with monetary policy. More immediately, problems and fragilities in the banking sector remain and pose risks that the recovery in demand and activity we have seen across Europe – including in the UK – falters. But in the UK we have also seen CPI inflation rise to a level that is significantly above the inflation target. In recent months CPI inflation has begun to fall, but remains well above the 2% target level and that makes setting monetary policy difficult. We continue to face the problem of balancing risks: risks that inflation of 1.0pp–1.5pp above target lasts long enough to become ingrained in expectations and affect behaviour so that it is hard to bring down, versus risks that the recovery in output becomes weaker and then disappears, leaving inflation pressures lower than is consistent with the target further ahead. Since the financial crisis towards the end of 2008 economic policy has been unusually hard to manage. Both monetary and fiscal policy have been exceptionally expansionary. There has been an extremely large fiscal deficit. Fiscal policy is now being tightened. I look forward to the day when it will be appropriate to tighten monetary policy since a return to more normal levels of interest rates would be a welcome sign that economic conditions were also more normal.
It only helps if it is conducive to better macroeconomic performance. Volatility may be driven by fundamentals. Sharp movements in asset prices may help the financial system to serve as a cushion, an "absorber" for exogenous economic shocks. This is welfare improving since it avoids, or mitigates, adjustment in more rigid goods of labor markets. 1  I am indebted to Benoit Mojon for many useful suggestions and remarks. All remaining mistakes are mine. Opinions expressed are purely personal and do not necessarily reflect the positions of the Banque de France. BIS Review 37/2009  1  By the same token, not all procyclicality is bad. It all depends on the causal link: is the financial system the origin or the amplifier of destabilizing dynamics? Or does it simply react to cyclical evolutions in the real economy? We should only be concerned by "intrinsic procyclicality", which is created inside and by the financial system. Finally, cyclicality in the real economy can be beneficial to long term growth as it is one mechanism through which "creative destruction" can take place in the productive system. Real and significant damages occur if and when financial imbalances are allowed to build for a long time with two consequences: first asset prices significantly deviate from their fundamental value, which creates distortions in the allocation of resources; and second, those imbalances unwind suddenly and abruptly, triggering major disruptions in growth and the economic cycle. This is what is happening right now. And this closely resembles the definition of a bubble.

And experience has shown that price stability – their primary mandate – does not always coincide with financial stability and the avoidance of bubbles. Furthermore, in an integrated financial system, judgments have to be made on a worldwide basis. Another alternative is the IMF. But the IMF is mostly controlled by governments and decisions are made according to voting shares. Implementing macrosupervision will involve delicate decisions (like strengthening lending standards in good times) to which governments may not spontaneously agree. A fully independent body would certainly be necessary. Second, how is that judgment passed on to regulators and supervisors and translated into supervisory decisions. This is totally unchartered territory. I would just mention it as a matter for future research in the governance of the financial system. The instruments The most important instrument in our current toolkit are capital requirements put on some financial intermediaries. Those capital requirements perform a dual function. They act as compulsory buffers imposed on banks and their shareholders. They also have an incentive function: to prevent  4  BIS Review 37/2009  shareholders from taking too much risk with deposits. It has proven more and more difficult to reconcile those two objectives. In theory it could be done, just as taxes can be used both to raise revenues and allocate resources. But, in practice, they both may be lost into an increasingly complex system. In addition, capital requirements may not be binding when they need to.
We are very much data driven; we are driven by facts. We'll look at how all kinds of circumstances, including trade but also the global economy generally and the momentum we have in Europe, feeds into eurozone inflation and that will be the basis for our decisions. So far we are coming from a starting point which is strong and where we have increasing confidence that our inflation objective will be met. When I look at some of the wage deals going around at the moment in Germany and beyond, I see very healthy wage growth of some of those deals as well. When's that going to start feeding through into broader inflation, the kind of figures you want to see to be able to feel more comfortable about raising rates to a normalised level? We've seen some uptick in inflation even in the most recent numbers. It is slow, because we are starting from a point where unemployment at eurozone level was high and broad. We know that it takes time for it to translate into wage pressures. We have to be patient, but there is no reason to think that this will not translate into higher price and wage pressures. We've started to see it. In terms of the cover you've given countries like Italy and others as well, do you feel they've squandered that cover that the ECB has given and the support the ECB has given them through a lower yield and lower borrowing cost?

When Norges Bank had finished collecting the silver tax around 1820, the Bank’s silver holdings came to somewhat more than 50 grams per inhabitant, which is the equivalent of about one silver spoon. The value of the Fund has just recently exceeded NOK 5 trillion, or about NOK 1 million per inhabitant. It is the political authorities – the Government and the Storting – that define the investment framework for the Fund. Norges Bank is charged with the operational management of the Fund and ensuring compliance with the guidelines. Within the framework established by the Ministry of Finance, Norges Bank shall aim to achieve the highest possible return. The investment management function has to a large extent been delegated from Norges Bank’s Executive Board to Norges Bank Investment Management – or NBIM. Chart 8: Cumulative value of the Government Pension Fund Global (GPFG) The Fund’s results have been favourable. Since 1998, the cumulative return on the Fund has been close to NOK 1 800 billion, which is more than a third of the Fund’s total value. So far, our nation has earned a solid return on its investments. Chart 9: Real return on the GPFG and estimated spending High returns in recent years have contributed to an average annual real return since start-up of close to 4 percent, while the spending of petroleum revenues over the fiscal budget accounts for a smaller percentage of the Fund than earlier.
Last summer, sparked by the debate about a possible reduction in the US Federal Reserve’s bond purchase programme, long-term interest rates rose across the globe. Switzerland was no exception. The most recent interest rate reduction by the European Central Bank (ECB), by contrast, had little effect on Switzerland. One possible reason for this is that money market rates in the euro area were already at a very low level before the ECB’s decision and did not fall any further. Since October 2011, inflation rates in Switzerland have been predominantly negative. The introduction of the minimum exchange rate in September 2011 prevented a more severe deflationary trend, however. Lower price levels in Switzerland reflect, on the one hand, the impact of the past appreciation of the Swiss franc on import goods prices. On the other hand, price developments show clearly that domestic companies are lowering their costs so as to improve their price competitiveness. More than two years after the introduction of the  2  BIS central bankers’ speeches  minimum exchange rate, both effects have weakened considerably; this is also reflected in the current path of inflation. At the same time, inflation abroad is receding, especially in the euro area. The inflation differential between Switzerland and the euro area has thus decreased significantly. Inflation differentials play an important role in the valuation of the Swiss franc. This decreased inflation differential means that the real effective exchange rate will hardly change from now on and will remain considerably above its long-term average.

The credit cycle and monetary policy The knock on effects of defaults in the US sub prime market and the impact of big investors on asset prices are factors we need to assess not just in trying to understand the financial sector and the stresses it faces but in gauging the state of the economy more widely. The story of the sub prime market illustrates a wider point. In traditional banking markets in the past there has been an observable tendency for banks to overshoot both in offering credit at the top of the cycle and retrenching afterwards. That feeds through into asset prices and can have an impact on the wider economy. Despite the sophistication of the new capital markets, a very traditional cycle seems to have been alive and kicking in sub prime. 3  The definition of the official sector in the US Treasury survey also includes public bodies such as oil stabilisation funds. 4  See ‘International capital flows and US interest rates’, NBER working paper 12560, October 2006. 6  BIS Review 84/2007  A similar story could be told about the credit card and other unsecured lending over the last few years. The growth rate rose in the late 90s until defaults began to build up over the last 2 years and the banks and other lenders tightened up terms and conditions sharply (Chart 13). The path of commercial property prices in recent years suggests the same has been happening there (Chart 14).
Among the industrial countries, Japan made stronger efforts to bring its long recession to an end – through macro-economic stimulus and by strengthening its domestic banking system – and there are now signs that those efforts are beginning to be rewarded. Meanwhile the world economy has been effectively underpinned by continuing abnormally strong domestic demand growth in the United States. But despite these developments we still have a long way to go. If the immediate danger of global financial instability has receded, we are still stuck with slow growth in the world economy, currently at around 2½%, which is not much more than half the estimated trend growth rate. And we are stuck, too, with massive international imbalances, both between the emerging and industrial countries, on the one hand, and among the major industrial countries, on the other. Without a stronger resumption of capital inflows to the emerging markets, the industrial countries will need to accommodate an export-led recovery in those markets. That implies stronger domestic demand, and hence import, growth in the G7 countries, if the world economy as a whole is to get back on trend in the reasonably near term. And the immediate challenge in this situation is to try to ensure that, as domestic demand growth in the United States slows – as it probably must, by one means or another – demand picks up sufficiently elsewhere, especially in Europe and Japan, to take up the running.

Mr. George gives an address on recent changes in the international financial and economic environment Speech given by Mr E A J George, Governor of the Bank of England, at a Dinner with the Lord Mayor for Bankers and Merchants of the City of London on 10 June 1999. My Lord Mayor, Mr Chancellor, My Lords, Aldermen, Mr Recorder, Sheriffs, Ladies and Gentlemen. When we were last here for this splendid occasion I suggested that we were living in a dangerous international financial and economic environment. These were strong words for a central banker – but perhaps not strong enough. That environment rapidly became worse through the autumn, so that by around the time of the IMF Annual Meetings in October there was a good deal of talk about global financial meltdown and impending world recession – which was not simply journalistic hyperbole. Since that low point things have certainly improved. The hectic scramble for financial asset quality and liquidity following Russia’s default and the near collapse of LTCM – an exceptionally highly geared hedge fund – failed to uncover fatal weaknesses elsewhere in the financial system, and lenders and investors have gradually regained some of their appetite for risk. Fears of a general credit crunch in major industrial countries quickly receded; and sentiment towards the emerging markets has improved, with growing evidence of recovery in the original Asian crisis countries and a better than expected outcome in Brazil.