samchain/econo-pairs-v1 huggingface dataset:
If such a downturn were to persist, the economy would risk suffering permanent damage as unemployed workers drop out of the labour force, for example, or as relevant skills are lost. In this sense, monetary policy can safeguard the economy from structural damage and help avoid permanent losses to potential output. In the euro area, since the onset of the financial crisis, monetary policy has been at the forefront of efforts to sustain a healthy rhythm of economic activity and ensure that the price stability objective is reached. The ECB has used a range of tools in its policy arsenal to support aggregate demand in the euro area and secure price stability. During this period, paradoxically, the greatest danger that the Governing Council had to confront was not the one that the founders of the single currency had feared. The ECB is institutionally hard-wired to combat inflation. This was the key preoccupation of the  architects of the euro, born out of the German experiences with hyperinflation, both during the inter-war years and in the aftermath of the Second World War. From this preoccupation stem essential features of the set-up of the single currency area: a fiercely independent central bank, with a clear mandate to pursue price stability and robust safeguards to stop the ECB from monetising budget deficits, historically the root of runaway inflation. During the financial crisis, however, the nature of the problem the ECB faced was entirely the opposite.

In turn, the Governing Council adopted a more precise, quantitative definition of its objective. It aims for an annual rate of inflation of “below, but close to, 2% over the medium term” as measured for the euro area as a whole. The medium-term orientation of monetary policy is important, because in the short term 1  actual inflation can fluctuate due to temporary factors, such as spikes in oil prices or changes in indirect taxes. At the same time, it is also worth noting that the focus is on the euro area as a whole, and not on particular member states within it. But why should monetary policy focus on price stability? In the view of classical economists, money is neutral. On this view, the quantity of money in an economy affects nominal variables, such as the price level, the exchange rate and the nominal interest rate. However, changes in the money supply have no effect on real variables, such as output, incomes or relative prices. Monetary policy has, within this theoretical framework, no effect on the real economy at all. Today, most economists would consider that the neutrality of money holds only in the long run. In the long run, the economy reaches its steady-state equilibrium, with output at its potential. Any monetary expansion at this point, with the economy operating at full capacity, would merely push up prices. This is evident during episodes of hyperinflation, where rapid increases in the money supply lead to ever-increasing consumer prices.
“A desirable monetary policy is characterised by inflation under normal circumstances being close to the inflation target in a two-year time perspective while at the same time the paths for inflation and the real economy do not exhibit excessively large fluctuations.” Given this reasoning, I think it is possible to identify some important characteristics of a good interest rate path. Firstly, the interest rate should be set so that inflation remains close to the 2 per cent target. If inflation were to deviate from target from the start, we should normally choose a path for the repo rate that brings inflation back on target within two years. Moreover, this path should be chosen so that inflation is close to target even beyond the two-year horizon. This way of conducting monetary policy helps reduce uncertainty and anchor inflation expectations around the target. The interest rate should also be set to achieve as far as possible a stable, sustainable development in the real economy, as long as this is compatible with the price stability target. Let us say that the  11  See, for instance, Giavazzi, F., and F. S. Mishkin (2006). 12  See also Rudebusch, G.D. and J.C. Williams (2006). 13  See the box ”Uncertainty regarding future interest rate movements” in Inflation Report 2006:1 for some examples of how to produce such uncertainty intervals. 14  See the memorandum "Monetary policy in Sweden” which can be downloaded from the Riksbank’s website, www.riksbank.se or ordered as a printed document.

Irma Rosenberg: Riksbank to introduce own path for the repo rate Speech by Ms Irma Rosenberg, Deputy Governor of the Sveriges Riksbank, at Danske Bank, Stockholm, 17 January 2007. *  *  *  Thank you for the invitation to come here and speak about monetary policy. The Riksbank is constantly working on improving the bases for monetary policy decisions and its communication. As part of this work, we on the Executive Board of the Riksbank decided yesterday that we will publish our own views on what is a suitable development of the repo rate in connection with the presentation of the inflation forecasts. 1 I intend to devote my speech today to explaining why we have made this decision and also to mention some other changes we are making in connection with this. However, I will not on this occasion discuss the current economic situation. The Riksbank is considered by many experts to be one of the most transparent central banks in the world. 2 We were amongst the first to introduce a numerical inflation target and to publish our inflation forecasts and the minutes from our monetary policy meetings. This is so that the general public will understand the reasons for our decisions and also to enable our monetary policy to be evaluated. It further enables accountability and gives legitimacy to an independent central bank like the Riksbank. Now we have decided to publish our own forecast for how we believe the repo rate will develop.
Már Guðmundsson: Monetary policy at a crossroads Speech by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at the Icelandic Chamber of Commerce Monetary Policy meeting, Reykjavík, 5 November 2015. *  *  *  Honoured chairman, ladies and gentlemen: The Iceland Chamber of Commerce has a decades-long tradition of holding a meeting like this one on economic developments and prospects and monetary policy. The meeting is held following the publication of the Central Bank’s autumn forecast and, in latter years, the Monetary Policy Committee’s interest rate decision. The title of my talk today is Monetary policy at a crossroads. These crossroads are, first, the disappearance of the slack in the economy and the development of a positive output gap, with the result that the task of monetary policy is no longer to stimulate GDP growth to the extent that the inflation target allows but to ensure that the tension in the economy does not cause overheating, which would jeopardise economic stability. The second crossroads is that, in recent months, the labour market situation has become much more serious than would have been anticipated given the state of the economy. The third lies in the unusual level of uncertainty about the inflation outlook, stemming from the interplay between domestic inflationary pressures and the global tendency towards deflation. And fourth is the recent rapid progress in solving the of the balance of payments problem Iceland has faced since the financial crisis struck and the approaching liberalisation of capital controls.

Terms of trade are projected to improve significantly this year, contributing to a larger current account surplus than would otherwise occur, but the improvement will reverse to an extent in 2017 and 2018. The sizeable current account surplus of the past few years will therefore shrink significantly during the forecast horizon and will have nearly disappeared by 2018. Rapid growth in domestic demand under conditions of full utilisation of resources has often proven dangerous to Icelanders. Other things being equal, such a situation calls for monetary and fiscal tightening. Our initial position is unusually good this time, as can be seen in a strong current account surplus, a central government surplus and declining government debt, and inflation that is still below the target. But the tug-of-war between large pay increases and the  BIS central bankers’ speeches  1  global tendency towards deflation will determine how much and how rapidly this situation deteriorates in the coming term. In my speech at the Central Bank’s Annual General Meeting, I expressed considerable concern about the unrest in the labour market and the consequences that it could have for economic stability. In the speech, I noted that wage pressures that jeopardise the inflation target are generally considered a sign of both demand pressures in the economy and excess demand in the labour market, which must be met with tighter monetary policy. However, this was not consistent with a slack that was just about to disappear and a sizeable current account surplus.
Furthermore, after rising in the second half of 2018, credit default swap premia are now back at roughly the same level as in mid-2018. In the area of resolution, the Swiss big banks have improved their gone-concern lossabsorbing capacity since last year’s Financial Stability Report. Credit Suisse and UBS already meet all look-through requirements on a consolidated basis. Page 1/3  Berne, 13 June 2019 Fritz Zurbrügg  News conference  In addition to those at group level, the Federal Council has drawn up requirements on big banks’ loss-absorbing capacity at the level of individual group entities, and in early April initiated a consultation on a corresponding amendment to the Capital Adequacy Ordinance. These requirements are intended to ensure that not only the group as a whole, but also material group entities have sufficient loss-absorbing capital in the event of a crisis. The SNB supports the proposed amendments to the Capital Adequacy Ordinance. Work is also underway with regard to liquidity in a crisis, known as ‘funding in resolution’. It is aimed at ensuring that the big banks have sufficient liquidity during preparations for and in the phase immediately after resolution. For this purpose, FINMA is drawing up resolution funding plans in line with international standards. In cooperation with the SNB and the two banks concerned, it is currently assessing the big banks’ liquidity needs under possible crisis scenarios.

SNB stress tests continue to suggest that most of these banks have a sound capital base, enabling them to cover any losses they might incur under adverse scenarios. The proposed measures should help to ensure that the level of risks incurred in the mortgage market remains bearable in the future. For its part, the SNB will continue to monitor developments on the mortgage and real estate markets closely, and will regularly reassess the need for an adjustment of the countercyclical capital buffer. Page 3/3
Because I am certain all of you have committed to memory everything I said then, I’ll keep my remarks on LIBOR today short and to the point: We have only 459 days until the availability of LIBOR can no longer be assured, and everyone needs to put their nose to the grindstone in their efforts to prepare for the move off LIBOR. In the immortal words of Captain Jean Luc Picard—make it so! Before I continue on to today’s topic or quote other favorite Star Trek characters, I need to give the standard Fed disclaimer that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee or others in the Federal Reserve System. The Heart of the Economy The markets that are the center of attention today—the Treasury market, the repo market, and the mortgage-backed securities market—represent the heart of the circulatory system of our financial system and our economy, and indeed the global economy. When they are working smoothly, all the other parts of the system can perform as they should. But, the opposite is true as well. If these critical markets break down, credit stops flowing, and people can’t finance the purchase of a car or a home, businesses can’t invest, and the economy suffers, resulting in lost jobs and income.1 Financial markets aren’t static—they evolve over time in response to changes in technology, regulation, and business models. The Treasury market is not immune to this process of change.

7 For the Treasury market, see Michael Fleming and Francisco Ruela, Treasury Market Liquidity during the COVID-  19 Crisis, Federal Reserve Bank of New York Liberty Street Economics, April 17, 2020. For MBS, see Jiakai Chen, Haoyang Liu, David Rubio, Asani Sarkar, and Zhaogang Song, MBS Market Dysfunctions in the Time of COVID-19, Federal Reserve Bank of New York Liberty Street Economics, July 17, 2020; and Jiakai Chen, Haoyang Liu, David Rubio, Asani Sarkar, and Zhaogang Song. Cash-Forward Arbitrage and Dealer Capital in MBS Markets: COVID-19 and Beyond, Federal Reserve Bank of New York Staff Reports, no. 933, revised September 2020. 8 For the various New York Fed Open Market Desk statements on the expansion of repo operations during March  2020, see Repo and Reverse Repo Operations. FOMC statements regarding asset purchases at this time include: Board of Governors of the Federal Reserve System, Federal Reserve Issues FOMC Statement, March 15, 2020; Board of Governors of the Federal Reserve System, Federal Reserve Issues FOMC Statement, March 23, 2020; and Board of Governors of the Federal Reserve System, Federal Reserve Announces Extensive New Measures to Support the Economy, March 23, 2020. The improvement in Treasury market functioning following these actions is discussed in Michael Fleming, Treasury Market Liquidity and the Federal Reserve during the COVID-19 Pandemic, Federal Reserve Bank of New York Liberty Street Economics, May 29, 2020.
Barbro Wickman-Parak: Independence, inflation targeting and the importance of not being dead certain Speech by Ms Barbro Wickman-Parak, Deputy Governor of the Sveriges Riksbank, at a breakfast meeting at Skandinaviska Enskilda Banken AB (SEB), Stockholm, 14 May 2013. *  *  *  I would like to thank Mikael Apel, Advisor in the Monetary Policy Department for his help with this speech. An important lesson When one is, as I am, at the end of one’s professional career, it is natural to reflect on what is the most important lesson one has learnt. If one were to try to pass on one important insight to someone who is just beginning their career, what would it be? Of course, it is difficult to give a simple answer to this question, but one insight that would probably come pretty high up on my list is that it is so easy to fasten in what one might scientifically term the “prevailing paradigm”. By this I mean that it is so easy to believe that the means of regarding the world that is currently dominant is the best one and will apply, if not for ever, at least for the foreseeable future. I have come across this phenomenon numerous times during my professional life – and have of course been part of it myself. What is perceived as true and correct has varied from one time to another and sometimes the pendulum has swung violently.

Its advocates say that one of the advantages of a target for nominal GDP is that it forces the central banks to give consideration to developments in the real economy and not just to inflation. In general terms, a nominal GDP target would appear a fairly unnecessary complication in this context, particularly if one already conducts a policy that means there is scope, or even an obligation, to give consideration to the real economy – through a flexible inflation-targeting policy, such as the one conducted by the Riksbank and the Bank of England, or that conducted by the Federal Reserve, with a dual mandate to strive for both price stability and a good development in employment.15 A counterargument of a more practical nature is that inflation targeting can be based on better data. While the CPI and other relevant price measures are published every month, GDP and the GDP deflator are only published quarterly, and with a relatively long time lag. Moreover, the CPI is only revised in exceptional cases, while GDP data are revised almost routinely, and sometimes substantially. One argument that I think also weighs heavily, from a practician’s point of view, is the difficulties I foresee with regard to communicating a nominal GDP target. The inflation target is now fairly well accepted and the general public appears to understand it. It would probably be a different matter with a nominal GDP target.
Other countries were later incorporated into the benchmark portfolio. In 2007, small companies were included in the benchmark portfolio. Today, the Fund has equity holdings in 8,000 companies in almost 50 different countries. The bond portfolio was expanded from 10 to 18 countries in 1998. Since 2002, the Fund has gradually moved into the corporate bond market and mortgage-backed securities. Chart: Fund returns In 1998, analyses indicated that returns would be higher than achieved to date. It should be noted that the Fund is nevertheless considerably larger than expected 10–12 years ago. High oil and gas prices have resulted in substantial transfers to the Fund. Sizeable returns on oil in the ground have more than offset low returns on securities. Since equity investment started in 1998, the annual average real return on the Fund has been a good 3 per cent after expenses 8 . This figure is partly a reflection of the financial crisis. The Fund’s short history includes a lost decade in the stock market, with two periods of sharp decline. During financial crises of the type we have recently experienced, the government as investor has no place to hide. Even though it is less visible, the return on government real investments in Norway is also lower during economic downturns. The estimated size of Norway’s offshore oil wealth naturally varies widely with oil and gas prices and frequent changes in petroleum reserve estimates.

It is also important that the government’s portfolio of financial investments is constructed without considering the financing needs of Norwegian enterprises. By the same token, Norwegian companies can choose their funding structure independently of the government’s financial investments. The capital market serves as intermediary between the government as investor and firms’ capital needs, and this ensures the separation of public and private choices. The Norwegian capital market is part of a Nordic market and increasingly part of a  5  2  Report No. 4 (1988–89) to the Storting: Long-Term Programme 1990–93. BIS Review 145/2010  larger international market. Capital markets are a very efficient tool for channelling savings into investment. Since capital started flowing into the Fund, the savings plan has remained intact. This indicates that both the Fund mechanism and the fiscal rule are well anchored. This is a prerequisite for escaping the resource curse. On the other hand, only once in 2007 did the government budget bill call for spending below 4 per cent of the Fund. It later transpired that petroleum revenue spending was also lower than 4 per cent in 2006 and 2008. The Fund is in the process of becoming a major financing source for public expenditure for the coming decades. The Fund has reached NOK 3 trillion, or 120 per cent of GDP, of which NOK 600 billion are returns in foreign currency. The government can now spend NOK 120 billion annually from the Fund without reducing its real value.
A stock market that functions in the optimal manner, with rational investors, helps to allocate investment to the projects with the best expected yield. Of course, this requires rational behaviour and active, competent and well-informed investors. The development of the stock market has progressed rapidly and, in addition to the purely technical factors, regulations, better information and education, for instance through associations like the Swedish Shareholders Association, all contribute to creating a more efficient stock market. However, the market does not always function perfectly and it is not difficult to find episodes of herd behaviour and overreaction when pricing has not reflected fundamentals. One example I am thinking of is the IT bubble at the end of the 1990s. What has happened since the changeover to inflation targeting? The Riksbank became the 4th central bank in the world to conduct monetary policy with an explicit, low inflation target. First of all was New Zealand, three years ahead of Sweden, followed by Canada and the United Kingdom.1 If one looks back at developments since the changeover to inflation targeting, it must be said that monetary policy has worked well in Sweden. Following an initial period with relatively high interest rates and a tighter policy, the inflation rate has moved downwards and stabilised at a low level (Figure 3). One important difference compared with the 1970s and 1980s is that credibility has been established for the monetary policy target, which can be said in turn to be a necessary condition for the policy to succeed.

It’s also crucial because it complements, on the one hand, the fiscal stimuli launched by national governments, and on the other, the rapid and powerful intervention by the ECB since the start of this crisis. With all these measures now in 2/4  BIS central bankers' speeches  play, Europe is better equipped to respond to this unprecedented crisis. The agreement includes a generic reference to a future recovery fund that is yet to be defined. What criteria do you think it should meet? The ECB has always stressed the need for our Economic and Monetary Union to be completed in order for the euro area to become more resilient. On the one hand, we need a European deposit insurance scheme so that savings have the same protections in every country. We’ve also called for progress in capital markets so that euro area firms have access to more sources of funding. And in the fiscal sphere, we need a shared budgetary instrument that completes the monetary union. The fund that has been proposed could go in that direction, but its size and how it is funded remain open to discussion and will depend on future decisions by governments. In any case, the determination to present a shared response is very significant, because it is a strong political signal, and also a strong signal to the markets. Spain started the debate when it too voiced its opposition to the use of the ESM.