samchain/econo-pairs-v1 huggingface dataset:
Short-term inflation fluctuations around the central bank’s target, for instance, those observed in Russia in 2017, 2018, and 2019, with inflation expectations being relatively stable and even lowering, do not contradict price stability. Conversely, high inflation expectations that might entail a longer-lasting deviation of inflation upwards from the target involve significant risks to it. These are the risks of a decline in the purchasing power of incomes and savings, which is especially sensitive for the most economically vulnerable groups of the population. Monetary policy should mitigate such risks. Therefore, already in March 2021, as the economy bounced back to its pre-pandemic level, the Bank of Russia started to raise the key rate from its record-low of 4.25% to 6.5% p.a. following the July meeting of the Board of Directors. The Bank of Russia will make decisions on its further moves depending on the path of economic development and the trends of inflation and inflation expectations. Baseline scenario I would like to remind you that the Bank of Russia updates its medium-term baseline forecast four times a year in the course of the Board of Directors’ core meetings on the key rate. The forecast presented in the draft Guidelines was released earlier following the meeting held on 23 July 2021, but this draft extends the forecast horizon to 2024.

Page 7  Towards an international effort – central banks, industry and public authorities rowing in unison In a highly connected and networked industry such as payments, we can only make a real difference if we work together in a coordinated way. We need to row together in unison to reach our destination of faster, cheaper, more transparent and more inclusive cross-border payment services. So what are the concrete actions that each of the groups – central banks, industry and public authorities - need to take? The role of central banks Central banks, both as operators and supervisors, of payment infrastructure, we have a key role to play. We build infrastructure, add new functionality and set standards and policies to underpin safe and efficient economic and social activity. Central banks need to start changing policies and enhancing core payment systems in line with the best practices, assessments and analysis that are developed as part of the work on the 19 building blocks. To do so effectively, we need to listen to and collaborate with industry, involving them in outreach and consultations and updating them on latest developments. And we also need to share our learnings and experiences with our peers, and beyond. This could be done through the establishment of communities of practice, through which central banks can discuss challenges and barriers with peers and find ways to overcome them. The role of industry The payments industry is another key, and wide range group including correspondent banks, FMIs and the non-bank FinTech.
The investments necessary are long-term and the fixes, in many cases, will take multiple years to execute. A number of firms have sound programs in place to address these longstanding issues, but continued strong project management and tenacity are crucial. I see commitment to this basic “blocking and tackling” as essential to financial institutions continuing to be competitive – and relevant – in the digital world. And that’s the third dimension that concerns me: the competitive landscape for financial institutions in the digital world. As more and more non-financial entities are entering the financial arena, I worry that financial firms may lack the agility and ability to compete at the level that they need to – particularly with the added complexities (and likely constraints) of regulation. At the end of the day, will financial firms be able to compete in the same way – or will these largely unregulated players be the future of our financial system? 2. Culture  My final topic today is culture – a complex topic that we all know it is an important one. Before I get into this in detail, I want to stress that “culture” is very different from “risk culture.” You can have a strong risk culture within your firm, but still have cultural issues. The culture I am talking about today is broader and deeper. There seems to be a general acceptance that there needs to be changes to the overall culture in the financial services industry, as well as improvements to cultures within individual firms.

The road ahead Looking ahead, we see a number of challenges that firms are facing, and I thought I’d take a couple of minutes to share with you some broad themes that we see emerging. The list is not exhaustive or overly detailed – as I’m sure you will recognize – but I think it captures some of the issues that are – and should be – more “top-of-mind” for many of you. 1. Engagement of Boards and Senior Management: While management is clearly on the hook to develop and implement necessary changes, and despite the tremendous progress made in board engagement over the past few years, some firms are still struggling to set the appropriate level of engagement with their boards. The challenge for these firms is finding the right balance and having a clearer understanding of the roles and responsibilities of boards of directors. Based on our experiences with increased engagement with boards, a number of lessons can be applied to engagement between senior management and boards, including the importance of: •  Trust and credibility;  •  The qualifications and experience of board members;  •  Board leadership and in setting the right tone; and  •  The right composition of members. Firms should not underestimate the importance of the chairman or lead director, or the roles of the committee chairs. The board has the responsibilities to provide the appropriate level of oversight and to be prepared to hold senior management accountable for their running of the firm.
At the monetary policy meeting of 11 August, the Executive Board stated that new information since the previous monetary policy meeting does not suggest that we should deviate from the interest rate path envisaged in the June Inflation Report. Monetary policy easing through 2003 and into 2004 has resulted in low real interest rates. Short-term real interest rates may now be considerably lower than the level that implies long-term balance in the economy – the neutral real interest rate. A low real interest rate, and expectations of a continued low real interest rate, will contribute to stimulating activity even after the effects of the interest rate fall unwind. Calculations may, on an uncertain basis, indicate that the neutral real interest rate for Norway lies between 2½ and 3½%. It has probably fallen somewhat in recent years. Although the projections are based on rising real interest rates, the real interest rate will be lower than the neutral rate during the entire period. The monetary policy stance is therefore expansionary. So far,  the effects do not appear to be stronger than expected, but we have little experience of such low interest rates. It is uncertain how quickly prices and wages will react when growth in output and employment picks up. There is also a risk that an interest rate that is kept low for a longer period may lead to expectations of a persistently low interest rate. This may involve a risk of persistently high capacity utilisation and inflation eventually overshooting the target.

The rule specifying that only the real return on the Petroleum Fund is to be used means that the capital in the Fund shall not be depleted. The capital in the Petroleum Fund will increase as long as there is a positive cash flow (to the central government) from petroleum activities. When the conversion from petroleum revenues to financial wealth has been completed, the objective will still be to restrict withdrawals so that the real value of the Fund’s capital is maintained - in principle, indefinitely. The fiscal rule thereby provides a long-term anchor for fiscal policy. It provides a stable framework that contributes to curbing fluctuations in the Norwegian economy that are caused by converting petroleum revenues into investments at home and abroad. The fiscal rule for the budget implies that the government can use 4 per cent of the Fund over time. This year, around 6 per cent is being used. The deviation partly reflects an unexpected shortfall in tax revenues in recent years. The government budget deficit is the difference between total revenues and total expenditure. They each account for about half of total GDP in Norway. Even small deviations from expenditure and revenue projections can have a major impact on the deficit. Exchange rate  changes will also lead to fluctuations in the value of the Petroleum Fund. For these reasons alone, the use of petroleum revenues may in periods deviate from the 4 per cent rule. Spending was also increased in response to the economic downturn.
(f) Ecology  ABMs have been applied to a number of ecological problems involving the interaction of multiple agents with each other and with the environment. In the 1990s, ABMs were applied to population and resource dynamics and migration patterns (Grim (1999)). For example, there is now a large body of work on ABMs of marine organisms (Werner et al (2001)), simulating how these organisms are moved around by ocean currents and how they interact in food webs. Model-derived fish spawning locations have been found to coincide with observed spawning locations of fish (Heath and Gallego (1998)). These models have also been used to simulate the effects of hypothetical interventions, such as the impact of introducing new predatory species to eliminate pests, different techniques for managing fish stocks, or the impact of contamination of marine eco-systems (Madenjian et al (1993)). ABM techniques have been applied to the management of forests, by simulating the establishment, growth, and death of individual trees, taking account of tree-tree interactions as they compete for resources. These models have been used to help forest management and assess the systemic impact of environmental changes, such as widespread deforestation. 13  13  See Liu and Ashton (1995). 18  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  18  Figure 12: Migrating animals  Figure 13: Oceanographic patterns  Source: Bjørn Christian Tørrissen (CC-BY-SA-3.0). Wildebeest on Source: Bruno de Giusti (CC-BY-SA-2.5-IT). Fish (image  the Serengeti (image available here). available here).

7  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  7  Chart 1: Range of GDP forecasts in 2007Q4  Chart 2: Forecasts for World Growth by the IMF since 2007  Latest vintage of GDP data  Year on year growth 4 3  Apr-07 Oct-08 Apr-10 Oct-11 Apr-13  Oct-07 Apr-09 Oct-10 Apr-12 Oct-13  Apr-08 Oct-09 Apr-11 Oct-12 Apr-14  Percent year on year 7 6  2 November 2007 IR  5 1 4 0  3  -1  2  -2  1  -3  0  -4  -1  -5  -2  2002 2003 2004 2005 2006 2007 2008 2009 2010 2011  2000 2002  Source: Bank of England November 2007 Inflation Report; Bank of England Survey of Economic Forecasters. Source: IMF World Economic Outlook. 2004 2006  2008  2010  2012 2014  2016  For me, this is not really a defence. Economics is important because of the social costs of extreme events. Economic policy matters precisely because of these events. If our models are silent about these events, this jeopardises the very thing that makes economics interesting and economic policy important. It risks squandering the human capital endowment the financial crisis has bestowed. Even if some of the post-crisis criticism of workhorse macro-economic models is overdone, it still raises the question of whether new modelling approaches might be explored which provide a different lens on the world or which better match real-world dynamics.
For example, UK life insurers have increased their holdings of higher-yielding assets such as long-term, non-traded real economy exposures like property to back annuities.16  This increased risk taking may continue as insurance companies and pension funds adjust further to low returns. From a financial stability perspective, a key risk is that insurance companies and pension funds encounter higher losses in stressed markets and become forced sellers or bystanders rather than buyers, so amplifying market vulnerabilities. Other non-bank financial firms such as investment funds have also turned increasingly to less liquid and riskier investments. Investment fund flows now account for one third of total portfolio flows to emerging market economies (compared to one tenth before the crisis). 17 Bank analysis suggests that non-banks now hold around 40% of the rapidly growing global leveraged loan market. More than $ 30 trillion of global assets are now held in open-ended funds that offer short-term redemptions while investing in longer-dated and potentially illiquid assets, such as corporate bonds. This liquidity mismatch may lead to more frequent fire-sales of assets if funds are required to meet large investor redemptions. Fund leverage could further exacerbate this, for example due to margin calls on funds’ derivative exposures. In short, the adjustment to a low for long world is likely to lead to upward pressure on financial sector risk taking and downward pressure on resilience. We have started to see evidence of these effects in some sectors. One would expect such pressures to continue.

11 For example, the share of corporate debt owed by listed UK companies with a ratio of net debt to EBITDA  greater than four was 35% in 2018, compared to 28% in 2007. And the share of debt owed by highly leveraged US companies has reached pre-crisis levels of above 40%. 12 Globally, this share was around 60% on average in 2019Q1-Q3, close to record highs. 13 For example, PRA data indicates that the share of new lending with leverage above 7 times would increase from 18% to 28% if add-backs and subsequent borrowing were included. 14 The share of new mortgages issued at LTV ratios of 90% or more was 20% in 2019Q2 compared to 22% in 2006-07. 15 The spread of quoted 2-year fix rates at 90% LTVs over 2-year fix rates at 75% LTVs fell to below 0.5% in 2019H1, compared to a post-crisis average of more than 1.5%. 7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7  For insurance companies and pension funds the impact of low for long on the valuation of their liabilities, combined with the rigidity of returns expected by some claimholders (and specified in defined benefit pension schemes), puts pressure on their balance sheets. This has led to changes in asset allocation, with greater investment in less liquid, lower quality assets.
16 The Bank of England is playing its part to in the wider effort to ensure that productivity growth can resume, by taking steps to ensure that the financial system will be well placed to facilitate the implementation of these ideas, and the allocation of resources across the economy more generally. For example, much of the work of the Financial Policy Committee (FPC) in the years since the financial crisis has been focussed on ensuring that the banking system is resilient and well-capitalised. And the FPC is pursuing a medium-term objective to ensure that there are diverse and resilient sources of market-based finance to complement the banking sector. This is borne out in the improvement in the availability of credit to companies such as yours, which our agents tell us has been easing across the board (Chart 8). The combination of an impressive stream of ideas, and a financial system stable enough to facilitate their implementation means I am reasonably confident that productivity growth will return at some point. Moreover, I think it is reasonable to expect that resumption in productivity growth to come over the next year or so as the continued narrowing of slack in the labour market raises the incentive to increase output by increasing output per worker. But – as many a forecaster of productivity has learned – picking exact inflection points for macroeconomic variables can be difficult, so the degree of uncertainty around the timing of this is high. 5.

Indeed as a monetary policy maker, that is perhaps the most important question to ask. Judging by the behaviour of measures of inflation expectations derived from index-linked gilts, markets are attaching a low probability to the idea that the current weakness in inflation will prove permanent. Market-implied measures of long-term inflation expectations have been remarkably stable over the period in which inflation has declined (Chart 3). That is consistent with the MPC’s view that the majority of the decline in inflation over the period since the middle of 2013 can be accounted for by factors that are unlikely to have permanent effects on inflation. There has been a 44% decline in the price of oil from its peak, and a 17% appreciation of sterling since early 2013, and such phenomena can be expected to have large – but not permanent – effects on prices of consumer goods. The most important determinant of inflation at the horizon the MPC is concerned with is domestically generated inflation. And measures of domestically generated inflation (such as unit wage costs, Chart 4) have stayed relatively stable during the period in which headline inflation was declining. But what is a little puzzling is that, given the growth of the economy in recent years and the associated decline in economic slack, measures of domestically generated inflation have not picked up as quickly as we would otherwise have expected.
Have they been transformed into new puzzles and uncertainties? And what does it all mean for policy going forward? The good news is that the recovery has remained strong. Indeed, after the revisions to the past data in this year’s blue book we now know the economy passed its pre-crisis size in the third quarter of 2013. We can talk now of an expansion rather than a recovery. On the latest data, growth in the four quarters to September now stands at 3% – a little stronger than expected back last November. Growth was particularly strong in the first half of the year and the business surveys suggest that may well be revised upwards. In the latest quarter of this year, growth is reported to have fallen back to 0.7%. The burst of pent up demand that propelled the initial recovery was a little stronger and lasted a little longer than we had been expecting last November. But it does now seem to be fading. Moreover, growth has become more broadly based due to the marked pick up in business investment. The shift of the balance of growth towards business investment that the surveys were pointing to last November, has I am pleased to say come through more strongly than expected. Business investment now looks to have driven around a third of the increase in GDP we have seen over the past year. That has made the recovery more broadly based and more sustainable.

Even adjusting for that effect though, unit labour costs look broadly flat – much below the 2% rate of increase we need to meet the inflation target in the medium term. The big surprise, therefore, for the MPC – and it is a positive, if puzzling, development – has been the extent to which employment has been able to grow without generating clear inflationary pressure. Understanding why that has happened and how long it will persist is, in my view, now key to deciding policy. One possible explanation is simply a longer-than-usual lag between falls in unemployment and pay pressure emerging. Once you take into account productivity, the unexplained weakness in wages only really materialised over the last three quarters, a period over which unemployment was falling very rapidly. Some survey measures suggest the pay of newly hired employees is growing at a much faster rate, of between 2% and 6%, rather than the 1% rate seen across employees as a whole in the official data. On this view, a rapid pick up in average pay levels is in prospect, once more and more workers start to shift jobs and as pay of existing employees is adjusted in annual pay rounds. The parable of the rock pulled by the elastic band is a very relevant one in economic policy making: the rock may not move for a long time, but eventually it will. And the longer it takes to move the faster the move is likely to be.
Indeed, in mitigating inflationary pressures, an exchange rate appreciation restrains the MPR adjustments that could result from only the closing of the output gap. One working assumption we use in our projections is that the real exchange rate will change little into the long term. Any movements away from its trend are possible in a floating regime. Its potential financial effects on aggregate output and inflation will be definitely considered by the Board as an input for its future decisions. As we have demonstrated in the past, our monetary policy is highly flexible. It has contributed enormously to the good standing the Chilean economy enjoys today, in an environment of stable prices and restored employment and output. Now I will review the main features of the macroeconomic conditions we believe are the most likely for the next two years and its implications for inflation and monetary policy. Macroeconomic scenario The first closing of second-quarter National Accounts showed GDP growth at 6.5% y-o-y. In terms of velocity, the second quarter ended with an annualized quarterly variation of around 20% (figure 3). Domestic demand also grew above forecasts, driven by increased private consumption and a strong rebound of investment. Such dynamism has responded to not only temporary factors but also to more persistent ones. Among the temporary factors, what stands out is the immediate repair of the damages caused by the catastrophe of 27-F and the reversal of the dramatic contraction of domestic demand during 2009, associated to the then high levels of uncertainty.

The different surveys and asset prices can be read in more than a way in regards the true pace of normalization. Actually, the same as in June, the MPR implicit in swap contracts is lower than the one that can be inferred from the forward curve, mainly reflecting significant differences between the rates on non-indexed Central Bank bonds and swap contract as equivalent maturities. It is possible that these differences originate in the type of institutions operating in each market, which are not fully integrated, reflecting different preferences for instruments in pesos and in UF by resident and non-resident institutions. Similarly, this partial integration may mean that swap contract rates reflected more quickly and more intensely the movements of risk-free interest rates abroad. The baseline scenario of this Report uses as a working assumption an MPR trend that is comparable to the one observed in various expectations surveys (figure 11). Certainly, if actual conditions differ from those assumed in this baseline scenario, alternative policy measures will be required. Specifically, the Board believes that the scenario outlined here is subject to a number of risks. Considering that in June domestic demand – and output – already was showing faster than foreseen velocity, we cannot rule out gaps closing faster than assumed in the baseline scenario. Nor can we rule out that some part of that strength responded to merely temporary factors, such as the earthquake, and output will slow down before we think. In the global context, several risks are still latent.