samchain/econo-pairs-v1 huggingface dataset:
It may well be the case that these rates decouple in future as liquidity improves and the outlook for each economy develops further. Chart 5 Indicators of when Bank Rate is expected to have risen August Inflation Report  Implied by OIS(a) Latest Reuters poll(b)  Date 2017  2016  2015 Mar 2013  Apr  May  Jun  Jul  Aug  Sep  Sources: Bloomberg, Reuters and Bank calculations (a)  Series is calculated as the first date at which instantaneous forward OIS rates equal or exceed 0.75%  (b)  Reuters poll shows the median of economists’ expectations of the first rise in Bank Rate. This is based on a survey of economists’ responses to the question: “When do you expect the Bank of England to change rates next?”  Whatever the explanation for the recent rise in interest rates, we do not intend to maintain a running commentary on whether the market has got it right or wrong in relation to when Bank Rate will rise. Monetary policy is a medium-term game, and its success or failure cannot be judged over a matter of weeks or by volatile price movements. If market expectations are in the wrong place then market participants will realise that in due course and rates will adjust. In any case, in my personal view, the biggest impact from forward guidance was never going to be from trying to shift the sterling market curve around – it is still pretty flat for 2 years ahead.

Paul Fisher: Financial markets, monetary policy and credit supply Speech by Mr Paul Fisher, Executive Director for Markets of the Bank of England, Member of the Monetary Policy Committee, to Richmond University, London, 2 October 2013. *  *  *  Thank you for having me back at Richmond University. In this lecture today, I aim to review the behaviour and development of financial markets over the past year, including the period of heightened volatility since May and the introduction by the Monetary Policy Committee of explicit forward-looking monetary policy guidance in August. I will also assess the working and impact of the Funding for Lending Scheme over its first year of operation. Developments in financial markets When I spoke to you a year ago, financial markets were still scarred by the crisis years and there remained a number of significant downside tail risks to the global economy. Contacts were citing: the risks of a breakup of the euro-area; the possibility of a “fiscal cliff” in the US; a slowing in China, alongside already weak growth in the advanced economies; and tensions in the Middle East – especially around the Straits of Hormuz. But those tail risks were seen to be offset in large part by the commitment of central banks to respond. The ECB had announced its Outright Monetary Transactions programme and had been interpreted as publicly committing to do whatever it takes to keep the euro-area together.
35–54, and Kaminsky, G. and C. Reinhart (1999). “The Twin Crises: Causes of Banking and Balance-of-Payments Problems”, American Economic Review, 89, pp. 473–500. A well known example of complacency about East Asian growth is the 1993 World Bank report on “The East Asian Miracle”. BIS central bankers’ speeches  1  banking and balance of payments crises, could not happen in advanced economies.2 And yet this is exactly what happened in Europe ten years after the Asian crisis (see Chart 2). It seems therefore useful to look also at East Asia’s response to its crisis and see what lessons can be learned. One lesson is that a deep and fundamental restructuring of the domestic financial sector is necessary Given the financial nature of the Asian crisis, this was a key element in resolving it. Nonviable financial institutions were closed, viable institutions recapitalised and strengthened, value-impaired assets dealt with and the corporate sector restructured, including through foreign investment.3 These measures were implemented decisively. They were associated with a painful adjustment process in the crisis countries but, at the same time, they made a swift recovery possible. This experience contrasts with Japan’s experience in the late 1980s. Following the bursting of Japan’s asset bubble, there was by and large no rapid write-down of non-performing assets. Due to the low profitability of banks, it was believed that an immediate write-off of bad loans would prevent compliance with capital requirements.

“Japan’s Lost Decade and its Financial System”, The World Economy, 26, pp. 365–384, and Caballero, R., T. Hoshi and A. Kashyap (2008). “Zombie Lending and Depressed Restructuring in Japan”, American Economic Review, 98:5, pp. 1943–1977. 5  See footnote 4. 6  See Krugman, P. (1999). “What happened to Asia?”, in Sato R. et al., Global Competition and Integration, Kluwer Academic Publishers, pp. 315–327. Already in 1590 Hong Zicheng’s Càigēntán claimed that “water that is clear has no fish.”  7  See Krugman, P. (1994). “The Myth of Asia’s Miracle”, Foreign Affairs, 73:6 (1994: November/December). 2  BIS central bankers’ speeches  were essential.8 The lesson to be learnt was that sustainable growth can only be achieved by fostering an environment that encourages open markets, innovation and entrepreneurship. A third lesson is that re-nationalisation and protectionism are not the solution to a crisis Indeed, there is empirical evidence that more open economies recover faster from the output contraction that usually accompanies a sudden stop of capital.9 As such, the most open Asian economies, such as Hong Kong and Singapore, were among the least severely affected and fastest to recover from the Asian crisis.10 In other words, despite the attendant risks, globalisation in trade is still the best way to achieve progress and economic development, and open financial markets can support it provided they are backed by strong prudential supervision.
And that growth shortfall is in spite of the fact that global growth has strengthened more than expected in the May 2016 MPC forecast. The biggest risk I see to that outlook for demand is around the resolution of the current uncertainty about our eventual trading arrangements and the path that will be followed to reach them. Were that uncertainty to be lifted, I can see a case for why UK whole economy demand could grow more strongly, more in line with, for example, recent manufacturing indicators. Equally, were uncertainty to persist at current levels or even increase further, I could see a case for demand growth, and in particular investment growth, being weaker. The reaction of the supply side of the economy since the referendum is more open to interpretation and given the uncertainties is something informed people can have divergent views on. The combination of weak investment, strong growth in employment, weak wage growth and low productivity growth (Slide 7) lends itself to two potential explanations – and they are neither mutually exclusive nor exhaustive. In either case the sign of the response of key variables is the same, making it difficult to pick between them, but the implications for the outlook for spare capacity and inflation differ.

What is clearly more important than the amount of information given is that the communication policy, as part of the strategy, is consistent with the structure of the internal decision-making process. I can assure you that this is indeed the case. During the monthly press conferences, I make an introductory statement summarising the Governing Council’s discussions and conclusions before answering questions from journalists. As the statement is agreed, in substance, with all the Council members beforehand, it is similar to what others call BIS Review 128/1999  2  minutes. I am convinced that, for the purposes of establishing credibility and reducing uncertainties in the market, informing the public of such an agreed position on the part of the Governing Council is superior to publishing details of a Council discussion which are naturally difficult to assess for those who are not present at the meeting. Moreover, as mentioned, we should not pretend to know more than we do. It is thus important not to try to give guidance when the ECB itself is not sure. I very much agree that giving too much information is not always helpful. I am convinced that the Eurosystem already provides timely, high-frequency information of good quality, but, as I have said, trying to further improve our communications is an ongoing exercise. 3  BIS Review 128/1999
On one hand, there would be a group made up of relatively small institutions, which would not perform functions critical to the industry as a whole. In situations of non-viability these institutions would be subject to liquidation under an ordinary insolvency procedure and not resolution, given that the bankruptcy of the institution would be deemed not to generate harmful effects for the stability of the financial system as a whole. As a result, these institutions would not be obliged to hold minimum loss-absorbing liabilities and nor, naturally, would they have access to the Single Resolution Fund. Hence the insolvency of the institution would precipitate insolvency proceedings whereunder only the holders of deposits covered by the Deposit Guarantee Fund would enjoy protection beyond that provided by the institution’s net worth. Given the likelihood that, in the future, ordinary insolvency procedures will be applied more frequently than in the past to financial institutions that are not systemic, it may be advisable to consider specific adjustments to mercantile regulations when they are applied to these cases. The formal involvement of the Deposit Guarantee Fund in the management of the insolvency process might be an option worth considering. On the other hand, there will be a second group of institutions, normally bigger in size, whose potential failure would be considered to be of public importance given the harmful effects for the stability of the financial system that might ensue. This group would, therefore, be liable to pursue resolution processes.

Although the appreciation of the dollar is likely to cause some further softness in import prices, the continued decline in resource slack as the economy expands should push in the opposite direction. In addition, longer-term household inflation expectations have been well maintained through this period of very low inflation, as indicated by our Survey of Consumer Expectations. The combination of stable expectations and declining slack should push inflation slowly back towards the FOMC’s objective. Monetary policy As the FOMC has consistently communicated, the timing of lift-off will depend on how the economic outlook evolves. As I have discussed, the labor market has improved substantially and I expect to see inflation begin to firm later this year. If this labor market improvement continues and the FOMC is reasonably confident that inflation will move back to our 2 percent objective over the medium-term, then it would be appropriate to begin to normalize interest rates. At the March meeting, the FOMC removed language from the statement that indicated that we would be patient in beginning the process of normalizing monetary policy. But, as Chair Yellen remarked in her most recent press conference, removal of “patient” from the statement does not indicate that we will be “impatient” to begin to normalize monetary policy. Rather, the timing of normalization will be data dependent and remains uncertain because the future evolution of the economy cannot be fully anticipated. Whenever the data support a decision to lift off, I think it is important to recognize what this would signify.
Growth in real wages has been negative for all bar three of the past 74 months. The cumulative fall in real wages since their pre-recession peak is around 10%. As best we can tell, the length and depth of this fall is unprecedented since at least the mid-1800s (Table 1). •  Productivity – GDP per hour worked – was broadly unchanged in the year to 2014 Q2, leaving it around 15% below its pre-crisis trend level. The level of productivity is no higher than it was six years ago. This is the so-called “productivity puzzle”. 1  House prices are measured using the average of the Halifax and Nationwide indices. 2  Okun’s original misery index, which was also referred to as the “discomfort factor”, comprised unemployment and inflation. 3  Adding real wealth and/or real borrowing costs to the index does not alter the underlying trends. 4  The value for 2014 is an estimate based on projections consistent with the August 2014 Inflation Report. 2  BIS central bankers’ speeches  Productivity has not flat-lined for that long in any period since the 1880s, other than following demobilisation after the World Wars. •  Annual real interest rates – for example, rates earned by households on time deposits adjusted for consumer price inflation – are around zero. They have been near-zero for close to four years. Real deposit rates have not been that low since the 1970s, when inflation was in double digits.

If the self-employed were added to the mix, whose wage levels are on average lower, those jaws would be wider still (Gardiner (2014)). Taken together, this paints a picture of a widening distribution of fortunes across the labour market – a tale of two workers. The upper peak of the labour market is clearly thriving in both employment and wage terms. The mid-tier is languishing in both employment and real wage terms. And for the lower skilled, employment is up at the cost of lower real wages for the group as a whole. This has been a jobs-rich, but pay-poor, recovery. What is true among workers is also evident among companies (Barnett et al (2014a, 2014b)). There is evidence of a widening distribution of performance across companies and sectors. Since the crisis, the distribution of productivity across sectors has widened more than fourfold (Chart 20). And while productivity among the best-performing firms has held up, for others it has fallen like a stone (Chart 21). If this story of a growing, but diverging, economy is right, then the message is clear. Forecasts of both macro-economic sunshine and showers, tales of both agony and ecstasy, sightings of both the upper and lower peaks, may be here for some time to come. Monetary policy implications A bi-modal distribution for the economy poses a particular challenge for monetary policy. It can only affect average outcomes in the economy. Should policy tighten in anticipation of tomorrow’s sunshine for some? Or remain loose fearing tomorrow’s rain for others?
Median responses to the Desk’s July 2017 Survey of Primary Dealers and Survey of Market Participants indicated the estimated cumulative effect on the 10-year Treasury yield to be around 25 basis points over two years following implementation, and the cumulative effect on the 30-year production coupon MBS option-adjusted spread to be 15 basis points over the same timeframe. 13 Results from the New York Fed’s September 2017 Survey of Primary Dealers  and Survey of Market Participants indicate expectations of about a one in four chance of a return to the zero lower bound at some point between now and the end of 2020. Conditional on that scenario occurring, survey respondents on average assigned probabilities of over 80 percent to the portfolio being larger than $ trillion at year-end 2020—an outcome suggesting a renewal of full reinvestments or large-scale asset purchases. Additional reasons for the 10 / 13  BIS central bankers' speeches  muted response in asset prices are examined in a speech cited earlier, “Gradual and Predictable: Reducing the Size of the Federal Reserve’s Balance Sheet.” 14 Projection scenarios considered balance sheet sizes containing long-run levels of reserves of $ billion,  $ billion, and $ trillion, as well as a range of sizes for other Fed liabilities and capital. However, the balance sheet’s normal size is not a fixed value, since some factors, such as Federal Reserve notes (U.S. dollar paper currency) and capital, tend to grow over time.

See the Federal Reserve Bank of New York’s report and accompanying data file, “Projections for the SOMA Portfolio and Net Income (July 2017).” 15 These liabilities include Federal Reserve notes (U.S. dollar paper currency), the U.S. Treasury’s General  Account, deposits held by designated financial market utilities and government-sponsored enterprises, and reverse repos conducted with foreign and international account holders. On average, these line items summed to over $ billion in 2017, on top of more than $ trillion in Federal Reserve notes. Fed liabilities are discussed more thoroughly in Lorie Logan, “Implementing Monetary Policy: Perspective from the Open Market Trading Desk,” remarks before the Money Marketeers of New York University, New York City, May 18, 2017. 16 It is worth noting that the size and structure of Fed’s securities portfolio and the role the portfolio played have  undergone substantial shifts at various times over the course of the Fed’s history, reflecting changes in policy implementation imperatives. See Meryam Bukhari et al, “The SOMA Portfolio through Time,” Federal Reserve Bank of New York Liberty Street Economics (blog), August 12, 2013. 17 Throughout this discussion, I focus on forward guidance and use of the central bank’s balance sheet (through  large-scale purchases of additional assets and reinvestment policies, but not funding for lending programs) as possible tools. U.S. policymakers have shown little appetite to pursue negative nominal interest rates, although that is another unconventional tool used by several central banks in recent years.
08.06.2023  7th ICO Sustainable Bond Forum Closing remarks ICO/ Madrid Margarita Delgado Deputy Governor  First of all, thank you for the invitation to participate in this 7th ICO Sustainable Bond Market conference. I am sure that the various panels have addressed recent developments in social and green bonds and the latest innovative approaches in sustainable finance. It would be interesting to take a look at the conclusions of the first edition of this conference to see just how much progress has been made in this market; huge strides for sure. For example, through the development of new instruments to mobilise the financial resources needed to achieve a net-zero economy and the goals set by the Paris Agreement. However, I am convinced we would also find that some of the challenges are still with us today, probably including the ones I am going mention in this address. Recent evolution of sustainable bond markets Developments in sustainable finance markets have been very significant. In recent years we have seen a surge in new bonds and instruments. According to the latest Climate Finance Monitor published by the IMF:1  - After decreasing in 2022, issuance of sustainable debt in 2023 Q1, considering green bonds and loans, social bonds, sustainability bonds and sustainability linked-bonds and loans, was in line with issuance in the previous two quarters, but was lower than in 2022 Q1. It should be noted that this was at the time of the banking sector turmoil in the United States and Europe.

- Green bond issuance saw the largest increase, comparing with the previous quarter and with the same quarter a year earlier. Financials and governments remained the largest issuers with a share of over 73 percent in 2023 Q1. Indeed, new sovereign issuance increased sharply in 2023 Q1, the European Commission issuing € billion of NextGenerationEU green bonds in its fourth syndicated transaction for 2023. 1  See IMF (2023). Climate Finance Monitor Q1 2023. May. 1  - Conversely, the issuance of most other types of bonds declined. For example, sustainability-linked instruments saw slower growth in the first quarter of the year, which, according to the IMF, “may reflect market participants’ perceptions around greenwashing and the credibility of the asset class to drive companies to meet sustainability targets”. Focusing on the euro area, according to the experimental indicators on sustainable finance developed by the Eurosystem: - The outstanding amount of sustainable debt securities issued in the euro area has more than doubled in the last two years. Securities designed to finance green and social projects, which account for the majority of the market, have seen a particularly strong increase. - Over the same period, sustainability-linked bonds recorded the highest growth rate. However, the relevance of these instruments in the overall debt securities market remains minor. Another interesting aspect highlighted by these experimental indicators is holdings. Since the beginning of 2021, euro area holdings of sustainable debt securities have grown continuously, following a similar trend to the one observed for euro area issuances.
Whether an economy functions smoothly and efficiently or not depends much on the manner in which the financial system performs this task. A strong banking sector with highly disciplined risk management helps to mitigate the risks of financial imbalances while the existence of a deep and liquid financial market that offers a breadth of financial instruments helps improve the ability of the economy to absorb shocks. More generally, the level of development of an economy’s financial sector has a fundamental bearing on social welfare insofar as it determines the ability of agents to smooth out their consumption profile in the face of fluctuations in income. As such, a substantial part of the observed differences in macroeconomic outcomes between emerging market economies and developed economies can be attributable to the disparate levels of financial sector development in these two groups of countries. Indeed, a number of empirical studies indicate that financial development, especially greater financial access, is associated with lower macroeconomic volatility. 2 Next, the institutional framework of monetary and financial supervision policy also has an important influence on the extent to which various shocks make their way through the economy. Importantly, in a setting where the central bank lacks independence, its performance is likely to be more easily influenced for short-term political ends with adverse macroeconomic consequences.

The first is how to deal with the cost and the constraint of coping with capital inflows. The second is the challenge in finding a set of tools that can help assess the potential build-up of financial vulnerabilities. And the third is how best to complement monetary policy with prudential measures to help prevent potential financial instability. On the first decision, for those under a managed float regime, lowering interest rates to reduce the relative attractiveness of the country to capital inflows may be an appropriate way to ensure price stability. But concerns of fast appreciation may not subside as exchange rates tend to behave more like asset prices than relative goods prices in practice. That means the nominal effective exchange rate can appreciate for a while in the short run, even after central banks repeatedly cut interest rates. This is an element of the well-known exchange rate disconnect puzzle. The risk is that a central bank may cut interest rate by too much, and at the same time sowing the seeds for inflation and an asset price boom down the road. An obvious important technical challenge to emerging market central banks, then, is to improve its ability to forecast inflation and output and be more precise about the range of possible natural rates of interest, which vary through time. Resisting the appreciating momentum of the exchange rate through interest rates alone may not be sufficient. A widely adopted practice that is assumed to be effective in the short run is through sterilized intervention.