samchain/econo-pairs-v1 huggingface dataset:
Lars Nyberg: Monetary policy and financial crises – some reflections Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at Danske Bank, Stockholm, 21 December 2011. *  *  *  On the first of January 1999, thirteen years ago, Sweden gained a new central bank act. Six people were given the privilege of independently deciding on something that interests almost everyone in Sweden, namely the interest rate. These six people were forbidden to take instructions from anyone – that is, politicians – and it was also forbidden for outsiders to give them instructions. I had the privilege of being one of the six who started in 1999, and I have thus been here ever since. This means that I have been a member of the Executive Board more than twice as long as any of the other current members and more than four years longer than any other person who has been on the Board. Whether this longer experience is then reflected in a correspondingly greater wisdom on central bank-related matters is of course less certain. In any case, I shall leave this to others to decide. An eventful period But there is no doubt that these thirteen years have been eventful. There have been the usual cyclical ups and downs, but also a number of crises in various parts of the world and, of course, the global financial crisis and the ensuring sovereign debt crisis that we are currently in the midst of.

If one has not created a credible crisis resolution mechanism in good time and does not manage to do so during the crisis, there is finally only one last resort, and that is the ECB. The ECB is the monetary union’s central bank and can do in a crisis what the union’s national central banks are unable to do. It can always create liquidity and buy securities as needed and therefore in principle it can also attain the same credibility as the Bank of England has in the United Kingdom. The problem is that the ECB does not have an indisputable mandate to do this, and that the EU member states have differing views as to whether it should be given such a mandate. The ECB should not save countries from making necessary adjustments in legislation and public finances, many quite rightly point out. But this also risks having the consequence that one refrains from the only remaining mechanism that can manage an acute crisis. Obstacles to setting up crisis management mechanisms One reason why it appears difficult to set up clear frameworks for managing a crisis in advance is, as I mentioned earlier, that crises occur so rarely. “There will be no more crises during my mandate period,” a politician said to me after the Swedish crisis in the early 1990s, when we were to discuss new crisis legislation. And he was right, of course. It took almost 20 years until the next crisis occurred, and by then he had left politics long ago.
The objectives of bringing inflation back to the target of 2½ per cent and anchoring inflation expectations imply a continued low interest rate. The krone exchange rate appreciated somewhat following the interest rate increase in June. On the other hand, output growth is high. The objective of stabilising developments in output may, in isolation, imply a higher interest rate. High capacity utilisation may generate a continued sharp rise in property prices and household borrowing. This could be a source of instability in demand and output in the somewhat longer run. The Executive Board’s assessment in the June Inflation Report was that the interest rate may gradually – in small, not too frequent steps – be brought up towards a more normal level if economic developments are approximately as projected in the Report. Such an interest rate path was considered to provide a reasonable balance between the objective of stabilising inflation at target and the objective of stabilising growth in output and employment. It was the Executive Board’s assessment that the sight deposit rate should lie in the interval 1¾ - 2¾ per cent in the period to the publication of the next Inflation Report on 2 November. At the monetary policy meeting of 30 June, the sight deposit rate was increased by ¼ percentage point to 2 per cent.

Over the past two decades, there has been a significant change in the financing of higher education—with state and local funding covering a smaller share, and students and their families bearing a greater proportion of rising college costs. While the federal student loan program has undoubtedly helped mitigate the impact of higher costs on college enrollment, more students now leave college with higher amounts of debt. At the same time, college dropout rates remain stubbornly high, and empirical evidence indicates that graduates from some colleges have had trouble finding good-paying jobs. Another important question concerns the consequences of growing student debt for the overall economy. To investigate this question further, we linked our CCP dataset to student enrollment records from the National Student Clearinghouse in order to analyze the relationship between homeownership, educational attainment and student debt. Not surprisingly, our research shows a strong positive association between educational attainment and homeownership, consistent with the fact that higher educational attainment is associated with higher average earnings. Interestingly, this relationship appears to hold irrespective of family background, suggesting that colleges may be successful in “leveling the playing field” across students from different socioeconomic backgrounds. At the same time, our analysis reveals that those with significant student debt are much less likely to own a home at any given age than those who completed their education with little or no student debt.
BIS Review 32/2010  5  The alternative repo-rate paths published in the Monetary Policy Report in July and the associated forecasts for CPIF inflation and the output gap are shown in Figure 3. The majority of the Executive Board adopted the repo-rate path marked as the main scenario. The situation on the financial markets in Sweden and abroad started to show signs of improvement during the spring, but was still highly uncertain. Major divergences between the market’s repo rate expectations and the Riksbank’s repo-rate path also arose during the year (see Figure 4). This resulted in monetary policy having less impact than intended. Partly for this reason, the Riksbank decided to lend up to SEK 100 million to the banks in the form of fixed-rate loans at a maturity of 12 months. It was deemed that this measure could contribute to lower interest rates on loans to companies and households. 6  BIS Review 32/2010  The repo rate and the repo-rate path were left unchanged during the rest of the year Following the decision in July, there were an increasing number of signs of a turnaround in economic activity in Sweden and abroad. At the monetary policy meetings on 2 September and 22 October, it was decided to keep the repo rate unchanged at 0.25 per cent. The forecast for the repo rate was also held unchanged on both occasions (see Figure 1).

Further repo-rate cuts in April and July GDP continued to fall dramatically during the first quarter of the year, in Sweden as well as abroad, and the GDP forecast for 2009 was revised further downwards compared to the Riksbank’s assessment in February. The Riksbank also assessed that CPI inflation would fall very rapidly during 2009, which was largely due to the rapid interest rate cuts implemented at the end of 2008 and start of 2009. At the monetary policy meeting on 20 April, the repo rate was cut by 0.5 percentage points to 0.5 per cent. The repo rate was expected to remain at a low level until the beginning of 2011 (see Figure 1). In July, the assessment was that the decline in economic activity during 2009 would be slightly deeper than the assessment made by the Riksbank in April. The Riksbank’s assessment was that the repo rate and the repo-rate path needed to be even lower. The repo rate was cut by 0.25 percentage points to 0.25 per cent at the monetary policy meeting on 1 July. The repo rate was expected to remain at this low level until the autumn of 2010 (see Figure 1). The Riksbank also assessed that the cut did not represent a threat to the functioning of the financial markets. Furthermore, the Riksbank deemed that, following the cut to 0.25 per cent, the repo rate had in practice reached its lower bound.
As the size of the repo transaction is based on a forecast of the borrowing requirement during the coming week, and the RIX accounts must be regulated daily, the bank system may nevertheless need to borrow or deposit in the standing facilities on individual days. If the amounts are large, this could risk leading to major fluctuations in the overnight rate. The Riksbank is therefore prepared on a daily basis to carry out what are known as fine-tuning operations. These operations involve meeting the bank system’s borrowing or deposit requirement on a particular day at a rate of interest that is 10 basis points above or below the repo rate. To summarise this relatively detailed outline, the Riksbank’s monetary policy steering system means that the Riksbank, by supplying a payment system and lending and deposit facilities, confines the market’s overnight rate within an interest rate corridor of 150 basis points. But it is through the weekly repo transaction and the daily fine-tuning operations that we ensure that the overnight rate is close to the repo rate. Following the most recent monetary policy decision, we want the overnight rate to be close to the repo rate of 4.25 per cent. In practice this means that this week’s monetary policy repo will be carried out at a repo rate of 4.25 per cent. Same objective but different systems Many other countries also have the objective of steering the short market rate. However the systems used may differ.

when the interests of the institutions and the markets do not coincide with the interests of society as a whole - the lenders’ short-term market-share philosophy at the end of the 1980s is an example of this. If means of control are needed, they should be designed as far as possible to lead to solutions that are compatible with the normal working of the institutions and markets. Some problems We can all see that interest in risk management has increased and that considerable resources are being invested here. The interest applies to both the production of new financial instruments, the emergence of new markets and the practical measuring and management of various risks. In addition, awareness is being stretched to cover new types of risk that did not previously receive the attention they deserved, such as operational risks, interest risks throughout the bank, liquidity risks and legal risks. This is essentially a positive development, but let me nevertheless conclude by pointing out  BIS Review 10/2004  3  some phenomena and situations, which indicate that the new developments have also brought about problems that need to be discussed and hopefully solved. The best known example is perhaps the LTCM debacle. The hedge fund suffered a sudden decline in value, which led to a confidence crisis among customers and it had to be shored up with liquidity infusions of many billions of dollars from a group of banks.
This micro transformation involves three elements: first, solving locally-nominated and defined problems; second, employing nudges or smart incentives to induce desired behavior; and third, experimenting on specific markets, groups or products before a broad roll-out. I must admit that these are hardly unfamiliar concepts in business. Yet few businesses have gone further to integrate these elements within broader transformation strategies. This has increasingly been the approach taken by the Bank, in facilitating initiatives such as the FinTech innovations in the financial sector. The Regulatory Sandbox introduced last year allows for the experimentation of potentially beneficial FinTech innovations that may seem inherently risky at inception, but properly harnessed could be a game changer. By providing a “safe” or “contained” space for testing, the risk effects can be comfortably observed, controlled and calibrated. Wider applications of this approach by institutions will go a long way to cultivate a balanced banking culture of innovation and resilience. Such applications are also not confined to the area of technology. It can span across a bank’s decision to enter a new market, reform incentive structures, disrupt outdated internal processes and provoke changes in management paradigms. The possibilities are limited only by our attitude to change, our ability to adapt, and our willingness to pursue creative solutions within acceptable risk limits. Banks that will remain relevant in the future are those that have a deep understanding of the shifts in the economy and the consumer.

As you know, a broad raft of measures was agreed last Thursday covering the three main spheres of action of the ECB throughout this crisis. The conventional monetary policy stance was additionally eased with a further cut in official rates which, for practical purposes, have now reached their lower bound. The horizon for the policy of generous liquidity provision was extended once more to 2016. And, lastly, a further step was taken in respect of unconventional measures with the launch of a new, four-year, long-term refinancing operation aimed and designed at promoting greater credit flow. As we know, neither the ECB nor monetary policy alone can resolve the problems at the root of the crisis still besetting the euro area. But decisions such as those last Thursday no doubt contribute to facilitating the action of other economic policy tools which, by their nature, may have a more powerful and lasting effect on growth and employment. Thank you. 4  BIS central bankers’ speeches
We have also expounded upon new realities in endpoint security, borne of painful experience, in which endpoint breaches can have serious implications for public confidence in the integrity of a network as a whole, even in circumstances when an operator’s infrastructure, applications, and security perimeter have not been compromised. Historically, market infrastructures have operated on the presumption that endpoint security is principally the responsibility of the endpoint, and infrastructure security is principally the responsibility of the operator. In the present threat environment, that bifurcation in responsibility is no longer so clear: the fates of operator and 1/5  BIS central bankers' speeches  endpoint are inextricably linked. The Wholesale Product Office’s efforts to strengthen resiliency and enhance endpoint security remain a consuming preoccupation, inspired meaningfully by international policy guidance promulgated by the Committee on Payment and Market Infrastructures (CPMI) and the Board of the International Organization of Securities Commissions (IOSCO). I want to commend our colleagues in the policy realm for their clarion call and practical guidance which have goaded the industry to action across both of these critical fronts and resulted in demonstrable progress. Rather than provide mere updates on the status of our local resiliency and security initiatives in response to this charge, which have been the focal point of prior remarks, I hope instead to frame a few forward oriented, even provocative, questions to advance the industry discourse and to consider measures to meet the present challenge.

William C Dudley: The economic outlook and implications for monetary policy Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, before the New York Association for Business Economics, New York City, 20 May 2014. *  *  *  Thank you for inviting me to speak here today. It always is a special pleasure to address my fellow economists. In my remarks today, I am going to focus on the economic outlook and the implications of that outlook for monetary policy. My views on the economy have not changed much since last fall. Although economic growth stalled in the first quarter, some slowing was expected and unseasonably harsh winter weather appears to have done the rest. The fundamental supports for a strengthening economy remain in place, and recent data seem to confirm that forecast. On the price front, I expect inflation to drift higher over the remainder of the year as the effects of some temporary factors that have been holding inflation down dissipate and the labor market continues to tighten. If my forecast is correct, as growth strengthens and inflation drifts higher, the focus will turn to monetary policy. In particular, what will be the timing of lift-off? And when lift-off occurs, how quickly will the Federal Open Market Committee (FOMC) raise rates and to what level?
It means that resource utilisation will be lower than normal during 2009-2011. This entails a risk that inflation could be lower than the monetary policy target. In addition, inflation expectations have fallen and are slightly below 2 per cent two years ahead. The repo rate and the repo rate path need to be lower to counteract the weak resource utilisation and inflationary pressures. This is why the repo rate was cut to 0.5 per cent and the Riksbank considers there is some probability of a further cut in the future. The future repo rate path has also been lowered and the interest rate forecast now points to a very low repo rate during a relatively long period of time. The repo rate is expected to remain at a low level until the beginning of 2011. BIS Review 56/2009  5  The economic policy measures that have already been taken and are expected to be taken in the future will contribute to a recovery abroad and in Sweden as the global financial system begins to function better. At the same time, a weak krona stimulates the economy. GDP growth is expected to be positive but relatively low in 2010. However, the labour market will lag behind and employment will not begin to rise until 2011. Inflation measured in terms of the consumer price index will fall very rapidly in 2009. This is primarily because the Riksbank’s substantial interest rate cuts at the end of 2008 and the beginning of 2009 reduced households’ housing costs.

These challenges are inherent parts of the mega trends, which include the crisis facing western economies and advancing regional economic integration. Currently, Thailand appears to be at a transitional gateway of these mega-trends, where the future looks blurry. The persistent economic slowdown plaguing the advanced economies of  BIS central bankers’ speeches  1  United States and Europe leading up to sovereign debt crisis and continued financial system stresses do not yet have a clear resolution in place. Many observers, however, view that after this transitional gateway, Asia will be under the spotlight with China as the new leader, leading the economic expansion for other countries in the region. Despite this optimism, countries in Asia cannot afford to relax, sit back, and enjoy the ride, as economic volatility could arise intermittently via trade and financial channels from western economies. The degree of such impact depends on how well each economy is prepared for the potential disruption. Another aspect of the transitional gateway is the ASEAN Economic Community (AEC) in 2015. This regional integration will bring not only changes in the regional investment and trade landscape, but also changes in people’s attitude as an ASEAN citizen where travel and contact will become more frequent. Nonetheless, we should not view AEC as the final destination, but rather a stepping stone towards enhancing economic resiliency in the region by creating a single ASEAN market and production base.
As a separate agency, FAA’s role extends beyond the program offerings of IBBM, MII, IBFIM and SIDC which are the affiliated institutes of AIF. I understand that FAA has already attracted both global and regional interests in its accreditation services, including from the UK, Asia and Middle East regions. FAA’s current work to develop a qualifications structure that will link the various qualifications relevant to financial practitioners under a cohesive framework is also strategically significant. Such a structure will allow for the mutual recognition of qualifications and provide clear and systematic learning pathways for financial professionals. This is important to meet the increasing demand for talent in the financial services industry – not just in terms of numbers, but also in the quality. I would also like to take this opportunity to acknowledge the critical role of the industry in enabling the FAA to meet its objectives. Ultimately, the value of the accreditation process lies in its ability to ensure that the educational foundations for professionals employed in the industry are preparing them adequately for their roles. The involvement of industry practitioners on the various accreditation committees and panels of the FAA provides that essential link to close the gaps between what the industry needs, and the training programs being offered. It also provides a platform for practitioners and training providers to engage on the future needs of the industry and the ways in which these needs can be met through professional education and training.

If the talent requirements of the financial sector are to be effectively addressed and managed, the industry cannot be a spectator. It is acknowledged that there are already many practitioners who are already serving on the Accreditation Technical Committees and the Board of FAA from different parts of the world, who have committed their valuable time, experience and knowledge to this important initiative. These will be important contributions as the industry continues to develop and mature. On that note, let me once again congratulate the Board and management of FAA on this occasion of its official launch. Bank Negara Malaysia together with the Securities Commission fully supports the FAA in its important role. I am confident that the FAA will have a significant impact in the efforts to sustain a strong talent pipeline for the financial sector in this more dynamic and challenging environment ahead. 2  BIS central bankers’ speeches