samchain/econo-pairs-v1 huggingface dataset:
However, in such a case, the reason for such deviation should be carefully explained. This rule of action played a significant role in the development of a more efficient and transparent monetary policy at a point in time when the inflation target policy was still relatively young and untested, but it is now obsolete and has been abandoned. However, it is important to retain the principle that deviations from quantitative targets may arise but that such cases should be carefully explained. Deviations from the inflation target may arise but such cases should carefully be explained. In the same manner, it is possible to imagine situations in which it may be justifiable to deviate from the best possible degree of stability in inflation and resource utilisation, but the justification for such deviations should then be carefully explained, so that external analysts can determine whether these deviations are reasonable. From this perspective, the use of the mean squared gaps forms just one more step towards a more systematic and transparent inflation targeting, in which central banks can be evaluated and held responsible for their decisions with even greater accuracy than before, after the introduction of numerical inflation targets, published forecasts for inflation and the real economy, published policy-rate paths, detailed and attributed minutes and other important steps taken in the development of a systematic and transparent monetary policy. BIS Review 22/2010  11  References  Bergo, Jarle (2007), “Interest Rate Projections in Theory and Practice”, speech held at Samfunnsøkonomenes valutaseminar at Sanderstølen, 26 January 2007, www.norgesbank.no.

As usual, it is necessary to consider all information, where, in practice, the assessment of effects not covered by models is of great significance. If something cannot be considered to affect the expected value of future inflation and resource utilisation, then monetary policy does not need to react to it.7 Kohn (2006, 2008) mentions three conditions that should be fulfilled before central banks implement “extraordinary measures” to handle possible asset price bubbles, such as the  7  8  See Svensson (2003) for a discussion of monetary policy with extreme outcomes with low probability. BIS Review 22/2010  unsustainable development of housing prices: “First, policymakers must be able to identify bubbles in a timely fashion with reasonable confidence. Second, a somewhat tighter monetary policy must have a high probability that it will help to check at least some of the speculative activity. And third, the expected improvement in future economic performance that would result from the curtailment of the bubble must be sufficiently great.” As these conditions are very seldom fulfilled in practice, it is very seldom that the issue arises, in practice, of allowing asset prices to influence monetary policy.8 It has occasionally been claimed that a central bank should be cautious as regards lowering the interest rate to very low levels, as this would be venturing into unfamiliar waters. I object strongly to “unfamiliar waters” being an argument against cutting the repo rate.
Muhammad bin Ibrahim: Charting a path for the future Remarks by Mr Muhammad bin Ibrahim, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the National Public Sector Accountants Conference 2017 "Charting a Path for the Future", Penang, 15 August 2017. * * * Thank you for the invitation to speak today. My congratulations to Jabatan Akauntan Negara Malaysia and Persatuan Akauntan Sektor Awam Malaysia on the successful organisation of the 28th National Public Sector Accountants Conference. In two weeks’ time, we will be celebrating our 60th year of independence. Our nation has come a long away – economically, socially and politically. Faced with the challenge of the new and the unknown at the dawn of our independence, our nation has risen to the occasion time and again. We have persevered. We have adapted. We have transformed. We have grown from strength to strength despite the many challenges. This boldness of spirit is something that has driven us from the very first moments of our nationhood. Upon the proclamation of our independence in 1957, Tunku Abdul Rahman had imparted these important words: “From henceforth, we are masters of our destiny, and the welfare of this beloved land is our own responsibility.” These last six decades have been a journey committed to this endeavor. Where rubber and tin once dominated, we now have an integrated, open and diversified economy. Where roads once laid bare, now stands world class infrastructure.

The public sector must be ready to steer and lead the nation onto a new, uncharted path with confidence, certainty and conviction. This is a heavy responsibility. What we do today will have ramifications on the future of our children and our children’s children. We must rethink the way we formulate policies, the way we deliver on our mandates and the way we think about public policy. 1/4  BIS central bankers' speeches  Today, I would like to speak about three possible characteristics that will be necessary for the public sector to navigate the challenges of the future. These are: Integrity, Agility and Validity of Measurement. Integrity: The courage to take the road less travelled As public servants, our duty is to serve and protect the public interest. Our legitimacy is strengthened by their confidence. Discharging this responsibility will become more challenging as we move forward: Priorities and needs will continue to expand faster than our resources. In these times, moral courage, integrity and transparency will be more important than ever. We must be brave enough to pursue the right course of action, doing the right thing, unpopular as they may be in the short-term. We must also be accountable for our decisions. This requires that we engage and communicate with the public as never before, explaining clearly the rationale of our policies. It is also important that we foster a culture and environment that prioritises these values at the level of the individual.
10  BIS central bankers’ speeches  We are still in early days on this initiative and will work with the industry on how best to take this forward. Fourth, supporting a FinTech ecosystem. The effort to grow a Smart Financial Centre must go beyond the financial industry, to help nurture a wider FinTech ecosystem. We need a strong FinTech community that can: •  generate ideas and innovations that FIs could adapt and adopt; and  •  provide a platform for collaborations with the industry to produce innovative solutions for defined problems and needs. For those of you who are not aware, we have a pretty vibrant FinTech start-up community that is growing over at the “Launchpad” in Ayer Rajah Industrial Estate. MAS looks forward to engaging FinTech start-ups more actively – to better understand emerging innovations as well to help them design their solutions bearing in mind the regulations and risk considerations that apply to the financial industry. Fifth, building skills and competencies in technology. Technology will disintermediate and make obsolete many jobs in the financial sector, but it will also create new ones. Finance professionals will need new capabilities. And the industry will need skills and expertise from other disciplines traditionally not associated with finance. MAS and the financial industry must work together to prepare for the changes ahead on the jobs and skills front. Building capabilities and opportunities in FinTech will be a key area of focus in the financial sector’s SkillsFuture drive.

Dear guests, I wish you a successful work and a pleasant stay! Thank you. 2  BIS Review 165/2010
11  Looking further ahead, developments in global financial markets will have a considerable impact on the GPFG. Higher inflation and signals that interest rates will be raised faster than markets expected have recently made investors uneasy. The long equities bull market may be nearing an end. In a transitional period, higher interest rates will also reduce the value of the GPFG’s fixed income portfolio. NORGES BANK ECONOMIC PERSPECTIVES 17 FEBRUARY 2022  Developments ahead may also be marked by demographic changes, tension between countries and lower global trade integration. Moreover, we are facing a necessary transition to a low-carbon economy. Whatever happens abroad will still leave its mark on the GPFG. No investment is completely safe, as history has shown. In 1904, the Norwegian government set funds aside in the State Reserve Fund to be used only “in extraordinary circumstances or in an emergency”. When it was dissolved in 1925, it was nearly empty. Creative accounting must take some of the blame. Yet it didn’t help either that it was invested in only a few assets – mainly UK, French and German government bonds – investments regarded at the time as absolutely safe. After the First World War, the value of German and French government bonds was close to zero, wiping out much of the State Reserve Fund’s assets.5 The investment strategy behind the GPFG stands in stark contrast. The fundamental principle underlying the strategy is risk diversification. This lessens the potential for an across-the-board value decline in GPFG assets.

It is difficult to completely capture a sequence of events where changes in different variables tend to reinforce one another in economic calculations. If the households have also been overly optimistic - irrational - in their expectations, it becomes particularly difficult to capture these effects. It is therefore important for forecasters to make more “qualitative” assessments in addition. Another reason for not trusting solely to formal models based on historical data is that the effects of structural changes that have taken place fairly recently can easily be underestimated. Let me give an example that to some extent captures these problems. During the years from the mid-1980s to the beginning of the 1990s, substantial changes were made in the economic structure and there was a clear correlation between the change in house prices and the change in household borrowing. The decline in house prices during the financial crisis at the beginning of the 1990s was largely due to an unfavourable combination of changes of both a structural and a cyclical nature. In connection with the deregulation of the credit markets during the second half of the 1980s, household borrowing increased substantially and the loans were largely used to buy houses. The fairly high and fluctuating inflation rate contributed to real interest costs after tax often being low, sometimes even negative, which in practice meant that one could at times make a profit from borrowing.
The difference between the sale price and the repurchase price, together with the length of time between the two legs of the transaction, implies a rate of interest (the reverse repo rate) paid by the Federal Reserve to its counterparty. The transaction leaves the size of the SOMA’s securities portfolio unchanged, but shifts some of the liabilities on the Fed’s balance sheet from bank reserves to reverse repos while the trade is outstanding  7  Unlike IOER, however, a full-allotment ON RRP facility would theoretically offer a perfectly elastic supply of a safe asset at a fixed rate. In practice, the amount of ON RRPs that the Federal Reserve could supply would likely be limited by the lesser of the level of excess reserves or the amount of securities available from the SOMA portfolio for such transactions. BIS central bankers’ speeches  3  point target, is viewed as appropriate for providing some flexibility in interest rate control when the quantity of reserves remains elevated. As for the Fed’s tools for policy implementation, setting the IOER and ON RRP rates at the upper and lower bounds of the target range is a straightforward arrangement at the start of policy firming.

The Federal Reserve has also continued to test its Term Deposit Facility, which provides a term investment option for credentialed depository institutions. Recently, TDF tests varied the rates and maximum awards and introduced an early withdrawal feature that provides favorable treatment of term deposits under the U.S. liquidity coverage ratio. 20  The December 2014 and March 2015 quarter-ends, respectively, had a total of $ billion and $ billion in awarded bids outstanding between term and overnight operations combined. These amounts are close to the $ billion in bids that were submitted in the ON RRP operation at the September 2014 quarter-end, only $ billion of which were filled. On non-quarter-end days, take-up has averaged less than $ billion. 8  BIS central bankers’ speeches  In recent years, money market trading dynamics have changed, reflecting the effects of Fed monetary policy as well as other factors. The expansion of the Federal Reserve’s balance sheet and the introduction of payment of interest on reserves have significantly altered the motivation for many fed funds trades. 21 With an abundant supply of reserves available, banks’ need to borrow funds to meet their reserve requirements or to clear financial transactions has been dramatically reduced. Meanwhile, entities that have surplus cash but are not able to earn IOER, such as Federal Home Loan Banks, lend funds at sub-IOER levels to banks that borrow them for the purposes of depositing them at the Fed to earn IOER.
Our job is to make sure that both moves are properly managed and capitalised in the firms we regulate. This is much easier said than done for another type of corporate lending, largely carried out by investment banks. This type of lending is secured against equity holdings of the borrower, often in a related entity – so-called “margin loans”. The first observation about this is that it will often create wrong-way risk because the value of the collateral may well be linked to the credit-worthiness of the borrower, which can cause problems in times of stress even though collateral haircuts tend to be 30-50%. Largely due to this, we estimate that banks in London lost more than € in a single deal in 2017. But the broader observation is that this type of lending is not well captured by today’s capital framework for banks – in part because it tends to sprawl awkwardly across credit, market and operational risk requirements. I don’t ask you simply to accept this statement at face value – our analysis (presented in anonymised form in Chart 8) of the capital held against one such recent exposure by a range of banks illustrates it well: even allowing for differentiation in terms across firms, this level of variation simply cannot be right.

Before delving into the details, I’d like to give you a preview of my main points:   First, I would like to discuss capital and the financial crisis, and will suggest that many U.S. financial institutions did not have the quality or quantity of capital needed to withstand the shocks we recently experienced. The focus in Basel III on improving the quantity and quality of capital at financial institutions – particularly systemically important financial institutions – is critically important.   Second, I will suggest that we should be particularly focused on narrow definitions of capital, which are what investors focused on during the financial crisis.   Third, I will suggest that stress tests are an important supervisory tool that should be used for prudential and macroprudential3 supervision as well as for management’s own capital planning efforts. The rapid recapitalization of many financial institutions in the United States greatly benefitted from the attention during supervisory exercises (including stress tests) on the quantity and quality of capital. I will also discuss the evaluation of discretionary capital distributions (such as increasing dividends, and stock buybacks). Capital and the financial crisis I think it is instructive to look at the capital ratios of two of the very large banking organizations that encountered problems and were acquired during the financial crisis. Wachovia was one of the four largest banking organizations in the United States, with total assets in 2008 exceeding $ billion.
But, because it takes some time before changes in Bank Rate affect inflation, it is important that the Monetary Policy Committee look through this short-run volatility and try to understand where inflation might be heading in the medium term. That poses a real challenge. None of us can foresee the future. To assess the likelihood of different possible outcomes for inflation, we examine all the available information – official statistics, business surveys, and reports from around the country, including those from our team in Wales. Then we make a judgement about the outlook for inflation. That judgement cannot be made on the basis that just because certain developments seem to have forecast inflation in the past they will do so again. Such correlations are not stable over time. We have to try to discover the driving forces behind the mosaic comprising all the different pieces of information that we examine each month. To understand what is likely to happen in the economy, we have to behave like the child who cannot stop asking “why?” Why is output growing so steadily? Why did recorded employment fall last quarter? Why are money and credit rising so rapidly? Why have oil prices picked up? And each answer inevitably provokes another question “why?” So setting interest rates is not straightforward. Our job, in fact, is rather like taking part in a “spot the ball” competition.

There is no simple or self-evident answer to the question of what path of interest rates will be necessary to bring inflation back to the 2% target and keep it there. By now you must be asking your own “why?” question – why is he keeping us from such a splendid dinner? So I will not detain you. I have tried to explain this evening why interest rates have gone up. Each month we try to spot the shocks, evaluate their implications for inflation, and set interest rates to meet the 2% target. We do that to provide a backdrop of macroeconomic stability so that you can focus on the really important questions for your businesses. Why is that product selling better than this one? Why is my competitor changing his prices? And, most important, why did the Wallabies run the Welsh defence ragged in Brisbane, where Wales lost by almost as big a margin as England did to South Africa? I don’t have the answers to those questions. But, of one thing I can assure you, in terms of the economy we will never stop asking “why?”  BIS Review 63/2007  3
The New York Fed has maintained a gold vault used to store the gold reserves of foreign central banks since 1924 when construction of its main building was completed. Prior to 1924, the New York Fed held gold in custody for foreign central banks in other nearby vaults, such as the one maintained by the New York Clearing House. 12 Defined in general terms as “an arrangement under which one bank (correspondent) holds deposits owned  by other banks (respondents) and provides payment and other services to those respondent banks.” See the glossary of terms used in payments and settlements, published by the Committee on Payments and Market Infrastructures of the Bank for International Settlements. 13 Perhaps the most vivid historical example of this involved large-scale flight-to-safety flows of European central  bank gold reserves to the vaults of the New York Fed during the Second World War. In addition to safeguarding their gold reserves from the Axis powers, inflows of gold were used by Allied nations to finance their purchases of war supplies from the U.S. 14 The Federal Reserve’s Bretton Woods swap lines with foreign central banks were first established in 1962 and  used extensively until the collapse of the Bretton Woods fixed exchange rate system in the early 1970s. 15 The mechanics of currency swap operations among central banks is a case in point.

Regional Network surveys normally include supplementary questions on special topics, and over the past year, many of the special topics have concerned prices. We think they give us better insight into price drivers than the standardised questions we asked previously. We will continue to ask network contacts about prices when relevant, such as in the upcoming survey that will be published in March. If we learn that some of these questions adequately capture future price increases, we can include them in our regular questionnaire. It is also useful to look at similar surveys in other countries, as Norges Bank Watch points out. Norges Bank Watch discusses monetary policy trade-offs in an environment of high inflation, and whether the costs of high inflation after a cost-push shock are exaggerated in our modelling system. They point out that an optimal monetary policy response depends on the nature of the economic shock and the transmission of monetary policy. At the same time, the cost of high inflation must be measured correctly. Let me first say that these are the very questions that have featured in the discussions of our Monetary Policy and Financial Stability Committee over the past year. Among other things, we have devoted considerable time to assessing the effect of higher interest rates on household disposable income and the relative importance of the nominal and real interest rate. The results were also presented in a box in the June 2022 Monetary Policy Report.