samchain/econo-pairs-v1 huggingface dataset:
The inflation target will be fully reached towards the end of 2013, which is broadly in line with last year’s forecast. The difference is that the target will be reached from above, and not below. What caused such a radical change? First of all, there were increases in oil and other commodity prices. Second, the króna depreciated by 6½% in the first half of the year, bottoming out in mid-July before reclaiming about 4% of that loss. Third, house prices rose. Fourth, wages rose far in excess of productivity increases. Early in the year, it was primarily external – and presumably transitory – factors that caused the spurt in inflation. But as the year progressed, domestic cost pressures played a progressively larger role – wage increases in particular. For example, unit labour costs are expected to increase by 5½% this year and core inflation 3 excluding tax effects was up by 4½% in October, as opposed to just over 1% at the beginning of the year. Now let us look at monetary policy year-to-date. At the Monetary Policy Committee’s first meeting of the year, in February, it was decided to cut the Bank’s interest rates by 0.25 percentage points and communicate a neutral bias regarding the future interest rate path. This proved to be the last interest rate cut of the year. What we call the “effective policy rate”, which is where the Bank’s interest rate spectrum has maximum effect on short-term market rates, was then 3.6%.

A deterioration in bank profits can reduce the supply of loans and mean that investments that would have been profitable do not get off the ground. In the worst possible scenario, systemically-important banks would suffer a bank crisis. Falling asset prices thus risk triggering processes that could eventually lead to a recession. Psychological factors strengthen both an upturn and a downturn in asset prices and real demand. Sweden, like many other countries, as you know has experience of this type of development. The costs to society during the years following the bank crisis were very high. However, rapidly rising asset prices do not constitute a problem in themselves that requires measures. Deciding factors here are whether there is reason to regard asset prices as fundamentally exaggerated and whether the bubble has led to excessive demand in the real economy, as well as misallocation of resources and excessive indebtedness. However, a financial bubble that only creates winners and losers among the financial operators without spreading to the real economy is hardly cause for concern, as long as the financial system can carry out its tasks efficiently. Inflation targeting stabilises production Although there may be reason in certain situations to counteract exaggerated asset prices and the imbalances they create, the question is what measures are available. There is always a risk that intervention by authorities may in itself create more problems than one is trying to solve.
The fact that Stanbic Bank Zambia is opening its branch in a part of the city where most of the business players are unbanked is victory for the financial inclusion process which seeks to get more Zambians banked and more SMEs access financial products. Distinguished Guests, the role that SMEs play in an economy cannot be over-emphasised. SMEs provide sustainable economic growth through job creation, development of entrepreneurial skills and the potential to contribute significantly to export earnings. However, provision of finance to the SME sector in Zambia still remains a challenge. A survey conducted by the World Bank on Enterprise Development in Zambia (2007) identified poor access to finance as a major impediment to investment and growth in Zambia. Only 16% of firms surveyed reported having a loan or line of credit from a financial institution, compared with 23% for the region and 35% for all countries surveyed. Therefore, while Zambia’s cost of doing business index has progressively improved in recent years, access to finance continues to feature among the three key constraints to investment and growth. It is, nevertheless, gratifying to note that commercial banks in Zambia are slowly realising the importance of the SME sector. You may wish to note that at the end of December 2011, commercial banks’ lending to SMEs was at 21.0% of total loans, an improvement from 17.0% in December, 2010. This also represented an increase in lending to SMEs by 68.9% to K2,322.5 billion from K1,375.0 billion in 2010.

Although this trend is impressive, much more needs to be done in order for the sector to meaningfully contribute to the growth of the country’s economy. Provision of finance to the SMEs can be a leading conduit for transforming our economy by opening up business opportunities as well as channelling resources more efficiently and effectively to the sectors that require it the most. BIS central bankers’ speeches  1  Distinguished Guests, To see a commercial bank bring its services to the heart of the informal sector is an encouraging sign not only to the Bank of Zambia but to the entrepreneurs of Soweto Market as it demonstrates the confidence that the Bank has entrusted in the SME sector. It is also our hope that the perception of banks being intimidating to the informal sector will be a thing of the past thus alleviating the challenges faced by SMEs in accessing finance. Furthermore, by partnering with the local entrepreneurs in Soweto Market which is the biggest market in Zambia, Stanbic Bank is encouraging a culture of banking for a myriad of Micro small and medium entrepreneurs. Because of the key role that SME sector plays in the economy, the Bank of Zambia will ensure that financial institutions are fully responsive to the unique characteristics of this sector. The Bank of Zambia attaches great importance to initiatives that seek to enhance the provision of financial services to the underserved sectors of the economy. The opening of this Branch today is a demonstration of this important objective.
Getting over Covid  Speech given by Andrew Bailey Governor of the Bank of England  Resolution Foundation 8 March 2021  I am grateful to Lauren Barnes, John Barrdear, Philip Bunn, Andy Haldane, Jonathan Haskel, Karen Jude, David Latto, Clare Macallan, Nick McLaren, Marko Melolinna, Sophie Piton, Alex Rattan, Kate Reinold, Michael Saunders, Fergal Shortall, Brad Speigner, Silvana Tenreyro, Matt Tong, Jan Vlieghe, and Chris Young for their assistance in helping me prepare these remarks. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  Introduction It’s a great pleasure to be participating in a Resolution Foundation event today. I wish I could say what a pleasure it is to be at the Foundation, but that has to remain a hope for the future. I am going to talk today about the future, the post Covid future as the economy recovers from this traumatic experience. If I had to summarise the diagnosis, it’s positive but with large doses of cautionary realism. To summarise, after starting with some description and assessment of the Covid shock to the economy, I am going to draw out four important points:   Covid has been both a demand and supply shock to the economy, and the recovery therefore has to be in both elements, unusually so for recoveries I think. Absent a dual recovery, dealing with the issues that arise will be more difficult.

Much of these data were granular enough to differentiate economic effects across the income, sector and geographic distributions. 10 The fourth and final set of issues involves the interaction of pre-pandemic structural trends with cyclical developments. The recent global shocks have deep implications for previously identified structural trends such as secular stagnation and the shifting relationship between technology and jobs. Workers’ increased reliance on remote solutions during the pandemic probably accelerated the digitization of tasks, which in turn has broader implications for income distribution and productivity growth, as well as the property market. In contrast, other structural trends may have been somewhat arrested by recent events; for example, pandemic and geopolitical disruptions injected fresh fragmentation impulses to the world economy and possible unmoored economies from their previous low inflation equilibria. 11 These four issues—the complex nature of shocks, along with the appropriate policy response, labour market effects and interactions with pre-pandemic structural trends— are key pivots that confront the global economy. And they will each have some hearing at this year’s Forum. Prof Viral Archarya started us off last evening with an astute and realistic assessment of the global landscape before us and the vulnerabilities that lurk in financial market adjustments, drawing in insights from his research. 12 For the Policy Note session on “Labour Market Policies after COVID-19”, our speakers are Professor Eric French and Professor John Haltiwanger, two eminent labour economists whose work central bankers have always paid close attention to.
This thinking lay behind the Committee’s decision to issue a statement after its July meeting that the recent upward movement at the near end of the yield curve was “unwarranted”. More generally, the explicit guidance provided in August should also serve to emphasise that UK monetary policy decisions are taken with reference to the domestic outlook and will only be influenced by developments elsewhere in so far as they affect that outlook. There is mixed evidence thus far on whether guidance has helped to de-couple movements in UK short-term rates from those overseas. The prime exhibit against this having happened is the high degree of correlation between UK and US interest rates at the time of the FOMC’s unexpected decision at its meeting on 17/18 September not to begin to taper its asset purchases. As far as market participants were concerned, this was surely primarily news about the FOMC’s policy reaction function, not about the US economic outlook. So it ought also to have had little impact on UK interest rates. As Chart 7 shows, however, the movement in UK one-year interest rates two years ahead was almost as large as for the corresponding US series. That, together with the high co-movement prior to the September FOMC meeting when US interest rates rose, suggests that market participants may have not yet grasped the extent to which decisions over the level of Bank Rate will be driven by the domestic outlook. There is, however, other evidence which suggests that some de-coupling may have taken place.

In any case, as a breach of the threshold becomes imminent, it seems likely that the Committee will wish to provide further guidance on the future determinants of policy in order to reduce any uncertainty surrounding our reaction function. Can we say anything yet about the effectiveness of the introduction of forward guidance? As already noted, the primary objective is to give confidence to business and households that policy will not be tightened until there is a material reduction in economic slack (assuming that neither price nor financial stability are threatened) and to prevent an excessive snapback in market interest rates taking place simply because a recovery is under way. As far as the broad message to businesses and households goes, contacts of the Bank’s Agents suggest that businesses have got the message that the MPC will only begin to tighten policy once the recovery is entrenched and slack has been materially reduced. And in the period after the MPC’s announcement, the Markit Household Finance Index suggested that households expected Bank Rate to rise later than before, although the date has since come back in again, perhaps reflecting the continued flow of positive data. At first sight, the evidence from market interest rates is more equivocal. Chart 5 shows the instantaneous forward yield curve in May, August and today. Yields have risen substantially since May. On the face of it, that appears to suggest that the guidance has not been very effective at influencing the expectations of market participants.
Useful tools for it are decision statements, inflation reports, published inflation forecasts and central bankers’ public speeches. These tools are now standard in communication among the best ITperformers. For central banks from emerging markets applying these standards is very desirable, as in this way they can gain some ‘confidence premium’ from the market, who perceive such central banks as ‘goodpractice’ followers. This is very important especially amid growing internationalisation of financial markets, when interpreting central bank’s policy is much easier under standard communication. Surely, it is not the amount of communication that matters but rather its quality. This refers especially to central bankers’ talk. It is more important, what you say than how you say it as unclear signals may actually misguide the market. A recent example of communication problems was the puzzle over the first congressional testimony of Governor Bernanke and his later comments. Transparency and communication earned attention of most central bankers, yet some are keener than others. In 1997 Reserve Bank of New Zealand started publishing its three-year interest rate forecast. Since 2005 the bank has been presenting a central interest rate scenario. The RBNZ innovation has  14  McCulley P. “The Root of All Evil”, Global Central Bank Focus, PIMCO, May 2006. 15  FOMC: Federal Open Market Committee.

3  The current debate in the United States is of interest in this context. Even before the tragic events on 11 September, policy had considerable elements of neo-Keynesianism. In a column in Business Week (1 October 2001), Robert Barro, a leading neo-classicist, put forward arguments that I am sure would have earned a gold star from Professor Keynes. BIS Review 81/2001  5
However, I believe all of us who have experienced this environment have emerged with a very different lesson learnt. Indeed, we cannot overstate the extraordinary potential this setting offers to an institution such as ours which has always valued, and legitimately so, the soundness of its judgement. With that conviction, we should devote most of our efforts to forging closer insertion, collaboration and coordination-based links with our European partners with an essential aim in mind: to reinforce our weight and ability to influence decision-making. This is a challenge and it is also an opportunity, but it is above all a responsibility to support, from the vantage of the Banco de España, the project for European construction. The second objective has to do with our contribution to financial and macroeconomic stability. After an unprecedented financial crisis, the reputation of economic policymakers, of central banks in particular and, indeed, of the economics profession as a whole was enormously dented. 4/5  Testifying to this were the regulatory and institutional changes set in train to prevent similar situations from recurring. However, the real test, where we place our social prestige and credibility on the line, will involve us truly being able to identify risks and vulnerabilities in due time, being able to issue warnings about them and, within our remit, being able to act to mitigate them or to contribute decisively to other players acting when they must.

In tribute to the Governor, as I know that Fernando Pessoa is one of his favourite poets, I'd like to quote his “Odes by Ricardo Reis”, in which he reminds us of the importance of being truly committed to our work. “To be great, be whole: don’t exaggerate Or leave out any part of you. Be complete in each thing. Put all you are Into the least of your acts." Thank you all for being here. 5/5
The SNB has to manage a large volume of foreign exchange reserves. So it needs to find fairly large markets to absorb these volumes, while retaining a high level of liquidity, which narrows the range of available assets considerably. It therefore places particular emphasis on researching new investment opportunities, whether these be equities, currencies or markets. Hence, for example, the recent introduction of new currencies or the inclusion of additional countries, in order to better achieve a satisfactory degree of diversification. Third challenge: Investing our portfolio without influencing the markets. The rapid growth of our reserves required us to invest and reinvest large amounts. Amounts of this magnitude can have an impact on the stock, bond or money markets. This is why the SNB  4  BIS central bankers’ speeches  operates on the major markets and does not invest in niche markets. Moreover, to ensure that our investments do not destabilise the markets, we place amounts which they can easily absorb. This implies that any diversification after a large inflow of foreign exchange reserves must be gradual. We are also engaged in active discussion with our partners, the central banks of the countries where we invest, and we are pursuing an information policy in this area that is as transparent as possible. Fourth challenge: Maintaining an optimal proportion of equities in our portfolio. Despite the recent significant inflow of foreign exchange reserves, we have increased the proportion of equities, and it now stands at nearly 12%.

The main principles of foreign exchange reserve management at the SNB Currently, the management of foreign exchange reserves is enshrined in the National Bank Act (arts. 5, 30, 42 and 46), and defined in detail in the internal instructions drawn up in 2004 and revised in 2008. These instructions are available on our website. Contrary to received wisdom, the SNB is as transparent as possible about the principles surrounding the management of its foreign exchange reserves. Thus, in contrast to other central banks, it publishes quarterly data on its foreign exchange reserves, broken down according to currency and asset class. The basic principles of foreign exchange reserve management are very clear; let me just quickly run through them. First principle: Primacy of monetary policy over foreign exchange reserve management. Concretely, changes in foreign exchange reserves result from monetary policy decisions. The level of these reserves is a variable upon which reserve management policy has no influence. Once this framework has been established, the management of foreign exchange reserves takes place independently from monetary policy. However, the SNB does need to make sure that its investments do not give rise to any conflict of interest with the objectives of monetary policy, or indeed of the SNB as regards financial stability. So, for example, we do not invest in Swiss financials, so as to avoid a conflict between the management of foreign exchange reserves and the SNB’s mandate to contribute to financial stability in Switzerland. As a general rule, the SNB does not invest in Swiss corporate equities.
TALF loans are leveraged – haircuts against the AAA-rated collateral average about 10%; the loan terms are three or five years; and the loans are non-recourse, which means that if the economy performs very badly and the securities fall sharply in value, an investor can put the collateral that secures its TALF loan back to the Fed, only losing the collateral haircut. The loan is then extinguished. Because term, non-recourse financing is not readily available from the private sector currently and the spreads on asset-backed securities remain elevated, TALF provides an opportunity for investors to purchase AAA-rated consumer asset-backed securities and earn relatively high returns. Although some observers are concerned by the prospect of TALF investors achieving relatively high returns, I think that concern is misplaced. Investor participation is absolutely essential in order for the TALF to improve the availability of credit and to bring down the cost of credit for households and business. The prospect of relatively high expected risk-adjusted returns is precisely what gives investors an incentive to participate in the program. As investors begin to take advantage of the attractive TALF terms, spreads on ABS securities contracts, and rates of return go down, and most importantly, the costs of funds for the issuers of the underlying securities falls. Investors’ actions to seek attractive returns lead to lower borrowing costs for households and businesses. Does the possibility of attractive returns for TALF investors mean that the Federal Reserve is taking on large credit risks?

I suggest that each speaker delivers a 10-minute presentation before we start the actual discussion between the members of the panel and turn later on to the audience. Mrs Bair will speak first, followed by Mrs Novick, then Professor Philippon and eventually Mr Papiasse. Sheila, would you start? 2  BIS central bankers’ speeches
The Riksbank does not consider the present level of house prices and household debt to be an immediate threat to financial stability, but their current growth rates are unsustainable, so future problems cannot be ruled out. BIS central bankers’ speeches  3  Figure 4: Real residential property prices in Sweden and other countries  Index 1995 q1 = 100. Source: Reuters Ecowin and Statistics Sweden. (The Riksbank’s Financial stability report 2010:2)  If the current growth rates of house prices and household debt are considered to be a potential threat to future financial stability, it may be necessary to act soon, because it will take time for any measures to take effect. So the Riksbank is investigating instruments (existing or potential) to prevent or mitigate this threat by smoothing the house price cycle, controlling household indebtedness or improving the resilience of banks. There are a range of prohibitive instruments that could be used to restrict the choices of households and financial institutions. These could include, for example, the introduction of a binding maximum loan-to-value ratio on household borrowing 5 or a maximum debt-to-income ratio, or requiring mortgage interest payments to be fixed for a certain time period. There is also a range of taxation instruments that could act on the price of the activities of households and financial institutions. This includes changes to financial institutions’ capital requirements or changes to the reserve requirements (SEK or foreign currency that financial institutions are required to hold at the central bank).

4 But household indebtedness has continued to grow faster  1  During the crisis, the Riksbank provided extra liquidity to the Swedish banking sector through a number of long-term loans in SEK and USD. 2  However, we expect that some banks will need to raise their liquidity buffers to meet the new Basel III liquidity rules. 3  See Finansinspektionen, “The Swedish mortgage market and bank lending”, February 2010, and Sveriges Riksbank, “Financial Stability Report 2009:2”. 4  Finansinspektionen (2009), “Utvecklingen på bolånemarknaden 2008”, 2009:7. (Only available in Swedish.) 2  BIS central bankers’ speeches  than income (see figure 3), loan-to-value ratios have increased, and a large proportion of mortgages are variable-rate loans. These vulnerabilities could impair the financial system by increasing loan losses if the current economic recovery were to stall, or by impairing Swedish banks’ ability to finance mortgages if investors’ confidence in Swedish covered bonds were to fall. Figure 3: Swedish household debt and post-tax interest expenditure  Per cent of disposable income. Sources: Statistics Sweden and the Riksbank. (The Riksbank’s Financial stability report 2010:2)  It is too early to establish whether recent repo rate increases and the introduction of a maximum permitted loan-to-value ratio of 85% for residential mortgages by Finansinspektionen (the Swedish Financial Supervisory Authority) have had a discernable effect on credit growth. In any case, house prices are continuing to grow (see figure 4).