samchain/econo-pairs-v1 huggingface dataset:
The basic intention is to stabilise inflation around the target and at the same time avoid unduly large fluctuations in production and employment. Consequently the Riksbank chooses to disregard economic shocks with effects on inflation that can be assumed to be only transitory. Moreover, there may be grounds for heeding the expected course of events beyond the regular target horizon. There may be a case for adjusting the repo rate immediately if there are already strong reasons for expecting a marked increase or decrease in inflation directly after the two-year horizon. Another point to remember is the Riksbank’s function of promoting a safe and efficient payment system; problems in this context may call for interest rate adjustments even though the inflation target is not threatened. Such adjustments may be needed both to prevent potential risks from building up in the payment system and to moderate effects of problems that have already arisen. Departures of this type from the rule of action should, however, be made restrictively. When the clarification was presented at the beginning of 1999, the Executive Board made a point of the fact that deviations from the normal rule are to be stated clearly and justified. The Riksbank’s rule of action and some of the aspects I have mentioned have direct counterparts in current laws and their prefatory documents. The Riksbank Act states that "The objective of the Riksbank’s operations shall be to maintain price stability. In addition, the Riksbank shall promote a safe and efficient payment system."

As with the StabFund, we are convinced that – here too – we must take these risks in order to be able to avert other, even greater risks. Extraordinary times call for extraordinary measures. The financial market crisis has confirmed our belief that the SNB must have a strong capital base and a broad range of monetary policy instrument to ensure its capacity to act at all times. Chart 1. Effective exchange rate for Swiss franc Export-weighted against 24 trading partners, nominal, 1.2007=100 115 112.5 110 107.5 105 102.5 100 97.5 95  2007  2008  2009  Source: SNB Markets Analysis Platform  Chart 2. EUR/CHF and exchange rate volatility Implied volatility EUR/CHF 3M  EUR/CHF (rhs)  % 15  1.65  12.5  1.6  10  1.55  7.5  1.5  5  1.45  2.5  Jul  Aug  Sep  Oct  Nov  Dec Jan 09 Feb  Mar  Apr  May  Jun  1.4  Sources: SNB Markets Analysis Platform, Bloomberg  4  BIS Review 77/2009  Chart 3. Swap spreads Swap spreads Pfandbriefe Swap spreads financial  Swap spreads industrial Swap spreads utility  bp 300 250 200 150 100 50 0 –50  Jul  Aug  Sep  Oct  Nov  Dec Jan 09 Feb  Mar  Apr  May  Jun  Sources: SNB Markets Analysis Platform, Credit Suisse  Table 1.
In the aftermath of the financial crisis we took far-reaching action to make the financial system more resilient against crises – Covid is the first real test of those changes. The financial system has supported the real economy in the crisis, as it must. We need that same ambition in our approach to climate change. But what is different with climate change is that we know now it is coming, so we can identify where risks will arise and start managing them in advance. Compared to the financial crisis and the pandemic, the risks from climate change are even bigger and more complex to manage. And acting now gives us the best opportunity to manage those risks. The good news is that progress is being made. A mere five years ago climate change was considered more of a charitable cause within the financial sector. Although it can sound prosaic, this progress has to focus on data and disclosure. The Taskforce for Climate-related Financial Disclosures (TCFD) has led the way on this. What we cannot measure we cannot manage, so it is important that financial firms and their clients use the TCFD framework and the latest tools available to measure, model and disclose the climate risks and opportunities they are exposed to today and in different future climate scenarios. We at the Bank started to do this ourselves when we published our own climate disclosure this summer.1 We are now working with the Treasury and other regulators to consider the UK’s approach to climate disclosure.

To support this, we need to see a strong focus on public metrics that set out the climate impacts 5  Climate BES was first announced in the July 2019 Financial Stability Report and further detailed provided in the December 2019 Discussion Paper 4  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  4  of both investment and corporate activities. In turn, this will help to facilitate the development of capital market instruments that package risk and return and asset allocation strategies that align portfolios with the transition. The Bank will support the work to make this happen, consistent with the objective of our Financial Policy Committee to support productive finance and thus the economy. Returning to Bretton Woods for a moment. The UK economy and financial system is very open, and like Covid, climate is a common global risk and we cannot hope to insulate ourselves through domestic action alone. We are committed to working closely with willing international partners through initiatives such as the Network for Greening the Financial System (NGFS), of which we are a co-founder and very active member, and where much progress has been made in raising our collective ambition as central banks and regulators as well as identifying best practice in identifying and mitigating climate risks in the financial system.
It’s a world that presents us with enormous new possibilities, but also enormous new challenges.” 2 In my presentation here today I will, not surprisingly, take a central banker’s view and ponder the challenges this new world might raise for a central bank trying to achieve both financial and nominal stability. Financial stability The last decade or so, we have witnessed increased financial integration and competition across national borders. The unleashing of international competition in financial markets is a positive development. By spreading and diversifying risk, financial markets have become more efficient and stable. Deeper and more mature markets tend to be better equipped to deal with uncertainty and distress. We have also witnessed the forging of new and ever more complex financial instruments. Increasing the set of available financial instruments creates more complete markets. It enhances the opportunities for households and enterprises to decouple consumption and investment from current income. Investors can take on or load off risks in a more tailored fashion than before and actively manage their exposures and relocate risks to those best equipped to bear them. Yet, the flip side of increased financial integration and diversification is the potential for more widespread contagion if something goes wrong. Furthermore, rapid innovation and increased complexity can make it difficult to assess the real underlying risks of the new instruments. It takes time for borrowers and lenders to learn the true characteristics of new instruments.

When inflationary pressures are looming or building up, the Central Bank raises its policy rate in order to make credit more expensive and reduce investment and consumption, encouraging saving at the same time. The policy rate is not applied to achieve other objectives than the inflation target. Thus it is pointless to set other objectives for monetary policy except by abandoning the objective of price stability, which would be particularly imprudent. Steady enhancements have been made to the conduct of monetary policy. Forecasting has strengthened with a new and much more powerful macroeconomic model. A landmark was reached this year when the Bank began publishing its staff’s projection for the policy rate path that is compatible with attaining the inflation target within an acceptable timeframe. Previous interest rate assumptions had proved unsatisfactory and even misleading. Publication of the policy rate path has been welcomed and has facilitated the Central Bank in exerting the impact that it intends to have on market expectations. International agencies and foreign analysts who monitor economic developments in Iceland have praised the Central Bank’s monetary policy implementation, transparency and professionalism. It is interesting to note that these assessments are at odds with widespread attitudes in Iceland at the moment. In the climate that has prevailed recently, the Central Bank’s policy rate hikes have admittedly affected the exchange rate of the króna first, then demand much later. Among the explanations is that policy rate hikes have not had what should have been their normal effect.
However, no thorough analysis has been made of whether house prices and indebtedness entail problems or have any significance for future inflation and resource utilisation. At the same time, widespread research points to the policy rate being an unsuitable instrument for this, as it has small effects on house prices, but sizable effects on production, jobs and unemployment.   Recently, monetary policy appears to have been aimed at slowing down growth in GDP, and thus the recovery from what is called the Great Recession. This is because the motivation given for the repo rate raises has been that growth in the  BIS Review 158/2010  1    Monetary policy also appears to have strived, through references to the abnormally low repo rate, to normalise the level of the repo rate. This is despite the fact that the repo rate should not be a target variable for monetary policy, but merely an instrument without any inherent value.   The repo rate path in the main scenario is now far above market expectations, the market repo rate path according to implied forward rates. 1 The intended monetary policy – the Riksbank’s repo rate path – is thus much tighter than the actual monetary policy – the market repo rate path. The fact that the market repo rate path differs from the Riksbank’s repo rate path means that the intended repo rate path is not credible. The more expansionary actual monetary policy has probably contributed to the strong growth and the recovery.

There is nothing to say this would be the case, neither in the Sveriges Riksbank Act or its preparatory works, nor in the booklet “Monetary policy in Sweden”. Instead, I believe that the repo rate should in all situations be set so that inflation and resource utilisation are stabilised as far as possible, regardless of whether this requires a high or a low repo rate and regardless of whether there is a crisis or not. A repo rate path way above market expectations The repo rate path is much higher than market expectations according to implied forward rates. The repo rate path corresponds to much higher market rates than the current ones. If the repo rate path were to become credible, it would lead to a significant increase in long interest rates and a large appreciation in the Swedish krona, which would risk strangling the recovery in exports and GDP, raising unemployment and lowering inflation. The reasoning can be explained with the aid of some figures. In Figure 7 the red curve shows the repo rate path in the main scenario, and the blue curve shows implied forward rates according to Swedish market rates. The curves gave been extrapolated beyond the usual three-year horizon, to a five-year horizon. 6 Figure 8 shows the yield curves corresponding to the curves in Figure 7. The yield curves show short and long interest rates, more precisely a zero coupon rate as a function of maturity according to the horizontal axis.
Along with the Bank of England and the Federal Reserve, the SNB is represented as an observer in the IBA oversight committee. Matters discussed by the oversight committee include methodology, definition and data basis for the Libor rates; as such it plays an important role in supporting and evaluating the reforms that have been adopted. BIS central bankers’ speeches  3  Charts  4  BIS central bankers’ speeches  BIS central bankers’ speeches  5

The combination of complexity and manipulation has led to a loss of faith by investors in model outputs, and in particular risk weights, over the past few years. Surveys of investors suggest a fairly deep-seated scepticism about risk weights, with only a small fraction believing them trustworthy (Chart 9). From a low base, investor faith in these risk weights has continued to fall fast (Chart 10). These concerns appear to be reflected in the pricing of bank risk. Bank investors appear to have moved towards using simpler metrics, such as leverage ratios, when assessing capital adequacy. There is a positive correlation between banks’ leverage ratios and their market price-to-book ratios (Hoenig (2013)). No such correlation exists for banks’ regulatory capital ratios. Investors seem to have begun pricing the solvency risk they best understand. The lack of transparency about, and investor trust in, risk weights has important implications. For regulators, a lack of transparency can damage the power of market discipline in constraining risk-taking – so-called Pillar III of Basel. Or, put differently, the complexity of Pillar I of the Basel Tower (regulatory rules) risks emasculating Pillar III (market discipline). Pillar I has become Popeye’s forearm, Pillar III his bicep.3 For investors, uncertainty about banks’ true capital adequacy is priced. Where there is uncertainty, they will factor a premium into banks’ cost of capital. That may be one of the reasons many of the world’s largest banks have continued to trade at a discount to their equity book value.
In summary: SWESTR should replace STIBOR – the Riksbank will play an active part in this work So to summarise, my message here today is this: The reference rates that have been dominant for several decades have clear flaws, and this is true both internationally and in our own Swedish financial market. Due to the Riksbank starting to provide SWESTR for the Swedish market, there is now a robust and reliable alternative to STIBOR. So there are good reasons to start the transition from STIBOR at its shortest maturity (STIBOR T/N) to SWESTR as soon as possible, in line with international developments. It is not work done from one day to the next, but it is a job worth doing. In the longer run, it should also be possible for SWESTR to replace STIBOR at longer maturities. The Riksbank will support this transition in various ways. Our goal is that the dominant reference rate in the Swedish financial market shall be of the highest international standard and that requires both support from us as authorities and a high level of ambition among the various market participants. Thank you for listening. I look forward to your questions and comments. 1  Tomorrow-next refers to a deposit from the next business day to the following business day. The Riksbank collects data both on short-term money market transactions in Swedish kronor and on other transactions that may form the basis of STIBOR. Transactions under ten million kronor do not have to be reported.

And from tomorrow, the Riksbank will also publish average rates based on SWESTR. Initially, we will provide average rates for one week and one month periods. Average rates for longer periods will begin to be published gradually, until 1 March next year. In addition, we will provide an index for SWESTR that makes it easier to calculate the average rate for a period between any two business days. Backward-looking reference rates can serve the same purpose as forward-looking ones The backward-looking average rates are structured differently to the current forward-looking interbank rates. The forward-looking rate is known at the beginning of the period, while the backward-looking interest rate cannot be calculated until the end of the period. And the forward-looking rate includes a larger risk premium element. 6 [8]  In spite of these differences, my view is that backward-looking average rates will in many situations still function as an adequate substitute for STIBOR’s longer maturities, because I believe that predictability and the larger risk premium are in many cases not essential properties for reference rate users. Why, for example, is STIBOR 3 months a normal reference rate when a municipality issues a bond at a maturity of 5 years with a "variable" interest rate? The amount of interest payments during the term of the loan is unknown regardless of whether the reference rate is backward- or forward-looking. If the municipality (and the creditors) had wanted predictable interest flows, a fixed interest rate would have worked better.
The elimination of this main risk will also foster the development of uniform market standards so that government bonds in the euro area will become rather close substitutes, creating a large and liquid bond market. Obviously, this requires sound and sustainable budgetary policies that ensure that credit risk spreads remain small. Concluding remarks Following a remarkable period of disinflation in most member states, the Eurosystem has had the good fortune to commence its operations in an environment of price stability. The success enjoyed by the euro in its first five months can be certainly attributed to a number of factors. Above all, the successful efforts of member states made possible a smooth changeover to the euro. The independence of the ECB and the clear mandate to maintain price stability were 7  BIS Review 60/1999  crucial for ensuring a high degree of credibility of the Eurosystem’s monetary policy. As a final observation, I should simply like to mention that without the positive echo of financial markets and the permanent support of banks and financial institutions, a single currency in Europe could not have become a reality. BIS Review 60/1999  8

Greater use of financial products; as well as prudent use 1/3  BIS central bankers' speeches  of credit among households – would promote wealth creation. A nation with a more literate population – can achieve greater financial inclusion through the access and appropriate use of financial products and services. Such households would facilitate in achieving the intended outcomes of macroeconomic policies. Let me focus on three areas that are relevant towards shaping a better future in the context of financial literacy: 1. First – long-term financial planning begins at young age and relevant at each key life stages. 2. Second – on the individual responsibility to take charge of its own financial decisions and well-being; and 3. Third – building financial capability and enhancing literacy – is a shared responsibility. I will share the on-going collaborative efforts undertaken to raise financial literacy among Malaysians. Talking about long-term financial planning Based on Bank Negara Malaysia’s observation – there is a continuing concern – on the lack of attention to long-term financial planning among a majority of Malaysians. Only 40% of Malaysians are financially ready for retirement. A recent focus group discussion with retirees – shows that they would still rely on their children or purchase using credit in the event of emergency or for higher value items. This could be a result of lack of financial planning when they were younger.
Our assessment is that unemployment will reach approximately 6.5 per cent at the end of the forecast period (see Figure 19). A lasting  BIS central bankers’ speeches  5  reduction in the level of unemployment also demands that wage formation is effective so that costs in the business sector do not increase too rapidly. …and inflation can approach the target A new round of collective bargaining has now begun and the wage demands presented so far are higher than those presented in 2010. The Riksbank’s assessment is that wages will rise by almost 3.5 per cent per year in the years ahead. This is compatible with the inflation target. The assumption behind our forecast is that wage formation will work as well as it has over the last 15 years. Responsibility for this lies with the social partners. The krona is an important factor for inflation in Sweden as it determines how prices abroad are “translated” into import prices in Sweden. Historically the krona has weakened in periods of financial unease as investors often move their money from small currencies like the krona to the dollar and the euro. However, the krona has weakened only moderately this time, despite the financial unease (see Figure 20). We expect the krona to gradually strengthen as the financial unease subsides. The combination of falling commodity prices internationally and a stronger krona means that inflationary pressures from abroad will be rather low in the period ahead.

The development of real wages shows how much of the wage increases are left when a deduction is made for inflation. Real wages have increased by an average of 2.5 per cent since 1995, while they did not increase at all during the 1980s (see Figure 15). In real terms, wages have thus developed much better over the last 15 years than during the 1980s. The third area relates to inflation and monetary policy. Monetary policy was also changed in the light of lessons learned in the past, in this case during the periods of high inflation in the 1970s and 1980s. An explicit inflation target and an independent Riksbank have had a positive impact. Inflation has been low and stable since the mid-1990s and has largely been in line with the target (see Figure 16). The success of the inflation-targeting policy is also linked to the fact that fiscal policy and wage formation have been much more effective since the mid-1990s. We have thus learned from the past, and as a result Sweden’s economy is well equipped to meet the future. It is important that we make the most of this strong initial position in the period ahead, and monetary policy must of course play its part in this. So, what course can we expect development to take in Sweden in the future, and how can monetary policy help to smooth the way?