samchain/econo-pairs-v1 huggingface dataset:
It would not be sensible to relax capital requirements when the unusual hazards persist. Today, gradually strengthening capital adequacy, and so building resilience, is best not only for stability but also for sustaining the recovery through what might lie ahead. Monetary policy With government needing to set fiscal policy in order to repair the public finances, that means that the burden of stimulating our economic recovery falls mainly to monetary policy. Bank Rate is at, effectively, zero. And the Bank has provided further stimulus, via quantitative easing, in order to underpin demand, and so guard against inflation being persistently below our 2% target further down the road. For the economy as a whole, that has bought time to smooth the adjustment. For firms, it has reduced the cost of capital and the weight of debt burdens. The equity prices of leveraged firms have generally risen more than the market as a whole. Easy monetary conditions no doubt go some way to explain why more firms haven’t failed; and why the Bank has received few approaches, under what is still known as the London Approach, to help banks and firms keep talking when a co-operative solution is within reach. In all this, the Monetary Policy Committee faces a delicate and unavoidable balancing act.

Thomas Jordan: Monetary policy under the spell of the financial crisis Summary of a speech by Mr Thomas Jordan, Member of the Governing Board of the Swiss National Bank, at the State Street Global Advisors (SSgA) Prima Talk, Zurich, 6 May 2009. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  The crisis in global financial markets has led to a sharp downturn in the world economy. Unavoidably, the Swiss economy has been pulled down too. The Swiss National Bank (SNB) has reacted by considerably relaxing its monetary policy, moving – in effect – to a zero interest rate policy. The SNB is maintaining its ability to act at times of zero interest rates by making use of three unconventional measures: increasing the number of long-term repo transactions, purchasing Swiss franc bonds issued by private sector borrowers and buying foreign currency on the open market. The initial impact of these measures has been positive. Risk premiums in the money and capital markets have fallen slightly. The tendency of the Swiss franc to appreciate against the euro has been checked and volatility is declining. Curbing the upward pressure on the Swiss franc helps to protect against deflation risks in Switzerland. The Swiss economy is currently experiencing the most severe economic crisis since the midseventies.
It is important after key milestones have been delivered to take the time to reflect on how far we’ve come, but it is equally, if not more, important that we do not lose sight of the future, the benefits to be leveraged and the work that remains. Good progress has been made so far, but there is much left to do. And of course there will be challenges for firms as we continue along the course, navigating complexities around the implications of financial technology and EU withdrawal. Seeing this journey through will require ongoing focus, care and attention from all involved. But I am confident that collectively we will get there. 7  See: A blueprint for a new RTGS service for the United Kingdom. This includes having the operational capacity to operate a settlement account, and demonstrating compliance with a comprehensive risk management framework development with the Financial Conduct Authority, HM Treasury, HM Revenue & Customs, the PSR and the payment system operators. 8  7  All speeches are available online at www.bankofengland.co.uk/speeches  7

This ensures that governments continue to correct economic weaknesses while the ECB is active. The involvement of the IMF, with its unparalleled track record in monitoring adjustment programmes would be an additional safeguard. The consequences of the ECB’s actions So what are the likely consequences of the ECB’s actions? Before announcing the OMT programme, we considered very carefully the possible risks – and we designed our operations to minimise them. But I am aware that some observers in this country remain concerned about the potential impact of this policy. I would therefore like to use this opportunity to go through those concerns – one by one – and explain our views. First, OMTs will not lead to disguised financing of governments. We have specifically designed our interventions to avoid this. They will take place solely on secondary markets, where bonds that have already been issued are traded. If interventions take place, they will involve buying government debt from investors, not from governments. All this is fully consistent with the Treaty’s prohibition on monetary financing. Moreover, they will focus on shorter maturities and leave room for market discipline. Second, OMTs will not compromise the independence of the ECB. The ECB will continue to take all decisions related to OMTs in full independence. It will decide whether to intervene based on its own assessment of monetary policy transmission and with the aim of safeguarding price stability. The fact that governments have to comply with conditionality will actually protect our independence.
BIS Review 40/2007  5  instance, the members may disagree as to how quickly inflation should be returned to target after a shock. This type of situation may be complicated. But after all, we have managed to agree earlier on interest rate messages that have contained information on our future intentions. Other arguments have also been put forward against publishing one’s own forecast for the development of the policy rate. One is that it could damage our credibility and make communication with the general public and the financial markets more difficult. Let us assume that the central bank first notifies a particular interest rate path but that new information is received afterwards, which leads to a policy rate decision that differs from the path published earlier. According to this argument, the deviation could be perceived as a failure by the central bank and could impair the bank’s credibility 7 . However, I am fairly convinced that it is the other way around – that communication will now be clearer and more efficient. I believe that there is currently widespread understanding among households, companies and market participants that monetary policy must be adjusted when the prevailing conditions change. A forecast is by nature uncertain and this applies even more the further ahead it stretches. We have also been clear on this point. Our assessment of the development of the repo rate, as presented in the Monetary Policy Report, is a forecast. It is not a promise!

It has on these occasions been clearly understood that the Executive Board members are expressing their own personal opinions. One could call this a sort of “signalling by degrees”. That is, when the interest rate  7  See, for example, Giavazzi, F. and F. Mishkin (2006), “An evaluation of Swedish monetary policy between 1995 and 2005”, Reports from the Riksdag 2006/07:RFR 1, Committee on Finance. 6  BIS Review 40/2007  decision has been taken at the monetary policy meeting enough information should have already been signalled by degrees so that economic agents are not taken by surprise. And on the whole, our signalling policy appears to have worked quite well. But, like many other things, the demands made of our signalling have changed over time. Things look quite different today from when the inflation target was new and confidence in monetary policy was low. This is partly linked to the fact that for some years we have been an independent authority, with the demands for insight that this entails. It is also, as I have just implied, connected to the important changes we have recently made in our communication. Moreover, there may be some potential problems in the way we have signalled previously, although as I said it has worked fairly well. I intend to mainly focus on the time aspect of the signalling, that is, when or how often we signal or should do so.
Surveys suggest this message was understood by a majority of companies and 46  some households. By allaying fears about too-rapid a rise in rates, it is likely to have encouraged spending  and supported the economy. When the MPC did come to raise interest rates, in November 2017 and again in August 2018, it is interesting to see how well these were understood by companies and households. Around three-quarters of households, and around 90% of companies, had expected a rise in rates within the year ahead in surveys held immediately prior to the decisions. Simple, directional forward guidance on monetary policy appears, for this non-expert audience who comprise most of the spending in the economy, to have been effective. A second monetary policy example comes from the Bank’s quarterly Inflation Report. This was first produced over 25 years ago, as part of the first wave of the transparency revolution. It is a long and technical document, with language requiring at least 13-14 years of education to understand. 47  The  complexity of its language meant the Report was probably only accessible to around 10% of the population. 45  Bank of England (2013) provides a useful summary of concepts and issues relating to forward guidance; see Carney (2018) for a more recent discussion. 46 Carney (2018). 47 Haldane (2017a). 20  All speeches are available online at www.bankofengland.co.uk/speeches  20  In November 2017, the Bank began publishing two simpler, “layered” versions of its Report.

Combined with low growth abroad and increased trade with low-cost countries such as China, this has led to a fall in import prices. The relatively high price increases of Norwegian products reflect high wage growth and a tight labour market. The krone exchange rate, measured against the trade-weighted index, has appreciated around 13 per cent in the last two years. However, the krone was exceptionally weak in mid-2000. The krone is 4-5 per cent stronger today than in the early 1990s, and about as strong as the previous high in early 1997. Thus, the recent strong showing of the krone is not without precedent. Changes in the oil price have time and again been an important factor behind exchange rate movements. Empirical evidence shows that the exchange rate is affected mainly by large fluctuations in the oil price. The krone tends to depreciate if the oil price is very low, as happened during the Russian crisis in 1998. On the other hand, the krone did not appreciate accordingly when the oil price surged from 1999 onwards. Hence, the relationship between the oil price and the exchange rate has not been evident for the last two years. Since late 2001, however, our currency may have been used as a hedge against the upside risk to the oil price, and this may have contributed to its appreciation. Another factor behind the appreciation of the krone is the current low risk premium in global currency markets (measured by a global risk index, GRI).
The green line is the density implied by these probabilities, assuming a uniform distribution within each bin, and assuming that the end bins are truncated (since this is the policy rate, truncation of the lower open bin is quite natural; less so for the higher open bin, but very little probability is placed there by the average distribution). For visual reasons, the density forecast is plotted by connecting the mid-points of each bin. The mean is that implied by this density forecast. 45  In addition, even if participants were reporting the mode of the marginal distribution, the mode of the average distribution does not necessarily match the average of the modes, as is well understood. Of course, there is always the possibility that participants may not provide consistent answers when asked about the modal forecast and the entire distribution. 12  BIS central bankers’ speeches  because we thought this was a more effective approach to elicit unconditional distributions, and because we were interested in the scenario probabilities. Note that from January to March the survey question did not change, but we added an explicit “negative rate” bin. In addition to eliciting density forecasts conditional on various scenarios, the surveys have sometimes asked for jointprobability distributions for different variables. This is helpful in assessing how market participants expect the FOMC to respond to various economic scenarios.

122 (www.cesifogroup.de); Gouveia, S. and Correia, L. (***):Some facts about business cycles synchronisation across the euro area countries: the case of small countries, Centre for Transdisciplinary Development Studies (CETRAD), Department of Economics, Sociology and Management (DESG), University of Trás-os-Montes and Alto Douro (UTAD), Portugal. 2  BIS central bankers’ speeches  brought cycles together, although a few efficient and credible shock absorbers were devised at the eve of the euro. Further on, there is some evidence on the increasing correlation between real cycles and financial cycles across different groups of EU member states, as provided by Meller and Metiu (2015) 5. Such a pattern emerges regardless of different sources and well-documented differences in frequencies and amplitudes between real and financial cycles. Moreover, researchers from the Bank for International Settlements have shown that the correlation between real and financial cycles gets stronger over time as the duration and amplitude of financial cycles increases. The main explanation for the increasing correlation between the real and financial cycle is the so-called “unfinished recession” phenomenon, according to which globalization and a more activist monetary policy, which fails to take into account the state of the financial cycle, eventually cause a bigger recession down the road 6. We are left with two more interesting features of cyclical (co)movements. The degree to which real and financial cycles converge across groups of member states is neither constant, nor does it increase in linear fashion over time. All the previously described processes might deliver the periods of high synchronisation, followed by rapidly collapsing convergence.
Since the beginning of the year, domestic inflation has edged down, hovering around 1.3 per cent. Adjusted for the reduction in day-care rates in January this year, the year-on-year  2  BIS Review 80/2006  rise in domestic prices has been 1.6 per cent. The rise in prices has been lower than expected for both goods and services. There may be several factors behind the low inflation rate. Strong competition between various producers within the food industry and construction industry may have had a dampening impact on inflation. In addition, productivity growth in retail trade has been high in the past few years. Intensified competition may also have contributed to curbing the rise in prices for banking and insurance services. Several factors point to higher inflation in the period ahead. Capacity utilisation in the Norwegian economy is rising, which will push up the rise in prices for domestically produced goods and services. A tighter labour market will probably lead to higher wage growth in the coming years. The rise in oil prices is pushing up producer input costs. Increased electricity costs may also translate into higher prices for domestically produced goods and services. Outlook for the years ahead Monetary policy will increasingly have to reflect the constraints facing some Norwegian industries. Oil prices are of importance for the activity level in the Norwegian economy and central government revenues. In recent years, oil prices have risen sharply.

In the June Inflation Report, Norges Bank assumes that money market rates among our trading partners will gradually increase over the next three years. The path for domestic and external interest rates does not imply considerable changes in the krone exchange rate. Growth in disposable income has been high in recent years. Lower interest expenses as a result of the decrease in interest rates and relatively high real wage growth have resulted in an increase in household purchasing power. The rise in house prices may also have fuelled growth in private consumption. With high growth in employment and falling unemployment, consumption growth is expected to be high again this year. Since the publication of the June Inflation Report, electricity prices have increased to a further extent than expected. Forward prices for next winter have also increased. Higher electricity prices may in isolation reduce household purchasing power somewhat. On the other hand, growth in household income is high and there are market expectations of a fall in electricity prices later next year. A continued rise in house prices may contribute to holding up consumption growth. House prices increased further this summer, and the twelve-month rise moved up to 15.8 per cent in July. Residential construction is still high. In 2005, the number of housing starts was the highest since the beginning of the 1980s. As the interest rate level gradually normalises, household interest expenses will increase. Combined with projected lower employment growth and higher inflation, this might reduce growth in household purchasing power in the years ahead.
Matters would be different if the effects in question were temporary, so that they only affect the price level for a year or so. In that case there might be grounds for disregarding them. But deregulations and increased international competition are presumably as much a part of the inflation process today as were the opposite effects that increased employer contributions and other taxes exerted in the 1970s and 1980s. 3. Why have a rule of action? The Riksbank formulates monetary policy primarily on the basis of a forecast of inflation one to two years ahead. If inflation, measured as the annual change in the CPI, is expected to be above 2% during this time horizon, the interest rate is normally increased and vice versa. This rule of action is intended to: •  make policy more intelligible;  •  act as a support for internal decision-making;  •  enhance external credibility. The rule of action has been an important support for the Riksbank in recent years. Besides helping to make monetary policy more intelligible, it has contributed to a tighter analysis and a more structured internal discussion. But a simple rule such as this clearly cannot be applied mechanically. A noteworthy aspect is the time horizon to which the rule refers. The Riksbank is required to maximise goal fulfilment, that is, to keep inflation in line with the target, for ever.

Lars Heikensten: Six monetary policy issues  Speech by Mr Lars Heikensten, First Deputy Governor of the Sveriges Riksbank, at Umeå School of Business and Economics, in Umeå, on 7 November 2000. *  *  *  First a word of thanks for the invitation to visit Umeå and talk about monetary policy. The Swedish economy is developing favourably. Growth has been impressive in recent years, averaging around 3% in annual terms, and at present the rate may be even higher. This has contributed to a rapid reduction of unemployment and strongly rising employment. A look at the statistics shows that the present expansion of employment in Sweden is the fastest since the labour force surveys were first published in the early 1960s. And although growth has been strong, inflation has remained moderate. The explanations for the good circle in which our economy is now moving are not simple. But I do believe that one contributory factor is the realignment of economic policy that has been achieved in the past ten to fifteen years. This has involved deregulating the credit and foreign exchange markets, modifying components of the transfers system and paving the way for stronger competition. All this has helped to improve the workings of the economy. Another factor, perhaps the most important, has been economic policy’s commitment to stability, with price stability as a statutory objective and a successful consolidation of the public finances.
The index produced by the aggregation of indicators relating to investments also points to an ongoing upsurge in machineryequipment investments (Graph 12). Moreover, the high-rated increase in long-term credit use from abroad during the January-February period compared to the same period of the previous year indicates that investment-originated growth prevailed in the first quarter of 2006 as well (Annex Graph 1). Graph 11. Fixed Capital Investments (Annual Percentage Change)  Graph 12. Private Sector Machinery-Equipment Investments and Investment Index (MBYAT)  70  Public  60  Private  Total  50  8000  104  7000  102  6000  100  5000  40  98  4000 96  3000  -10  2006-I  2005-II  2004-III  2003-  2003-I  2002-II  2000-  0  2001-III  90 2000-I  92  0 1999-II  1000 1997-I  10  94  1997-  20  2000  1998-III  30  Private Sector Machinery-Equipment Investment (Constant pricesseasonally adj.) -20 04-I  04-II  04-III 04-IV  05-I  05-II  05-III 05-IV  MBYAT (Left axis)  Source: TURKSTAT, CBRT. 8  BIS Review 67/2006  Despite rapid growth in the total final domestic demand and the GDP, the current production tendency signifies a level that does not impose any pressure on prices. Hence, estimates for the output gap indicate that recent trend in economic growth does not pose a threat with respect to inflation (Graph 13).

I would first like to elaborate on the challenges we face as central bankers, then on our instruments and their effectiveness. I. Let me start with the challenges  a) As you all know, the Eurosystem’s primary objective is to maintain price stability, that is inflation rates below, but close to 2% over the medium term. However in the euro area, like in most advanced economies, inflation remains too low, despite the historically low interest rates: the harmonised index of consumer prices (HICP) indeed returned to negative territory, standing at –0.2% in February 2016, and underlying inflation, i.e. excluding energy and food, is only 0.7%. A certain number of factors are currently contributing to low inflation. Primarily, the euro area is faced with deflationary pressures associated with a series of economic shocks: firstly, the fall in oil prices, as well as the overall decline in commodity prices; secondly, the slowdown in growth in emerging economies and chiefly China; and, lastly, inadequate growth in the euro area with persistently high unemployment, which curbs wage rises and weakens demand and price growth. Moreover, structural factors, such as the ageing population, are also likely to exert downward pressure on the “natural” – or “Wicksellian” – interest rate. This rate can be defined as the interest rate consistent with the full employment of the factors of production. In this case, in order to achieve the right balance between savings and investment, markets rates must come down too.