samchain/econo-pairs-v1 huggingface dataset:
Perhaps the most pertinent question, however, is whether these historical “forecasting errors” would have had any decisive consequences for monetary policy if they had been anticipated well in advance. The answer in my opinion is: probably not. Even if we had allowed for the interest expenditure item’s downward effect on CPI inflation in 1996–97, we would still have lowered the repo rate. Neither would it be realistic to suppose that the Riksbank would have, as it were, chased its own tail and lowered the interest rate appreciably more on the grounds that CPI inflation was below the target. In the period in the late 1990s, resource utilisation was already rising rapidly and an even more expansionary monetary policy would hardly have been justified. The instrumental rate in Sweden was a good bit lower than in the United States in these years and also lower at times than in the euro area, at the same time as the Swedish krona was comparatively weak. Concerning the past year’s increase in inflation, it was not the supply shocks that prompted the decision in March to raise the repo rate but the picture that was beginning to emerge of the Swedish economy being rather close to or even somewhat above full resource utilisation. This may be a major problem, not for current inflation but rather for future inflation as activity continues to strengthen.

Professor John Taylor, currently a Treasury under-secretary in the Bush Administration, has formulated a simple rule for interest setting that has come to be named after him and been widely recognised. With the Taylor rule, the instrumental rate varies around an equilibrium rate with a correction for actual inflation’s relationship to targeted inflation and resource utilisation (GDP growth’s divergence from an estimated trend). Given that the economy is in equilibrium, inflation is 2 per cent and the output gap is zero, in Taylor’s version of the rule for the United States the nominal instrumental rate is 4 per cent. Divergences in resource utilisation or inflation prompt the central bank to raise or lower the instrumental rate, depending on the size and direction of the deviations. The Taylor rule is popular for several reasons; besides being relatively simple, it seems to give a relatively good account of monetary policy in many different countries. In that way it has contributed to a better understanding of how monetary policy is conducted. To date, however, no central bank has explicitly stated that it has chosen to base its monetary policy on the type of rule John Taylor advocates. BIS Review 24/2002  3  One result that a money supply target and the Taylor rule have in common is that monetary policy’s responses to the various shocks to which an economy is constantly being exposed are systematic and predictable.
This exercise proved to be both very useful and reassuring: thanks to the improvement of banks’ capital position with the implementation of Basel 3, and despite the high level of uncertainty triggered by the ongoing pandemic, it shows that the European banking system is resilient to a very severe adverse shock. 2.3 Stress testing should also prove helpful for banks to assess and manage their exposure to climate change related risks The forward-looking perspective of stress tests should prove particularly helpful for banks and their supervisors to handle emerging risks such as climate change. Building on the work carried out by the Network of central banks and supervisors for the Greening of the Financial System (NGFS): we, at the ACPR and Banque de France, have recently conducted such an exercise, with French Banks and Insurers. Beyond helping us identify at an early stage their shortcomings and limitations that we will need to overcome, such stress test have provided us with initial 2/3  BIS central bankers' speeches  assessment of climate change-related risks, exposures of French financial institutions, which appears actually to be moderate. But may be more importantly, it has proved helpful to us in incentivizing financial institutions to give the proper level of priority and resources to the monitoring and management of climate-related risks.

Richard W Fisher: Connecting the dots – Texas employment growth; a dissenting vote; and the ugly truth (with reference to P G Wodehouse) Remarks by Mr Richard W Fisher, President and Chief Executive Officer of the Federal Reserve Bank of Dallas, at the Midland Community Forum, Midland, Texas, 17 August 2011. *  *  *  The views expressed by the author do not necessarily reflect official positions of the Federal Reserve System. Thank you, Kirk [Edwards]. It is great to be here in the cool climes of Midland, Texas. I appreciate your having walked our friends today through the operations of the Dallas Fed. You know as chairman of our El Paso Branch board that we operate a well-run business as we provide services to the American people that only a central bank can provide, from making sure you have folding money, to lending to our community and regional banks, to supervising and regulating bank and thrift holding companies so as to protect depositors. As president and CEO of the Dallas Fed, I am responsible for a $ billion bank, accountable to a board of local directors. That board is chaired by Herb Kelleher (you Midlanders will appreciate that Herb’s immediate past predecessors were Jim Hackett, president and CEO of Anadarko Petroleum, and Ray Hunt) and consists of eight other citizens of our district; I am also advised by the private-sector directors of the El Paso, San Antonio and Houston branches of our bank.
For example, the rate cuts in 1996 and 1997 had caused a decrease in the CPI via housing costs. This could have resulted in the claim that interest rates should have been lowered further, as a direct consequence of the fact that they had only just been cut sharply. However, it wasn’t until the turn of the year 1998/1999 that the Riksbank developed a coherent, explicit approach to these issues. It had been preceded by a long discussion, where the main idea had been to change from the CPI to a different index, in which the components that fluctuated most due to temporary reasons would be excluded. However, the more we discussed this the clearer it became that there was no index that always provided the best picture of inflationary pressures in the economy. For this reason we opted instead for an approach whereby we, in connection with each decision, would make it as clear as possible what considerations were guiding policy at the time. This would enable our actions to be evaluated in a better way than before. The clarification states that monetary policy should normally be centred on bringing inflation to target one to two years ahead. It also identifies two cases when the Riksbank may depart from this rule: transitory effects on inflation and large deviations from the target.

For my part I also considered it important to focus the difficult forecasting work on the time perspective that was deemed to be the most essential for monetary policy and not become too involved in discussions about a more uncertain future. This argument was strengthened in my opinion when the Riksbank’s decision-making process became a collective undertaking. With a less explicit rule and an entirely flexible time horizon our discussions would have risked focusing – more than would have been desirable – on the choice of time perspective, at the cost of a discussion about what we actually know about the present and what we believe about developments over the coming two years. Consideration of real developments Allow me also to say a few words about the background to the clarification of the principles for monetary policy that the Riksbank decided on at the start of 1999. When the inflation target was established in 1993 we understood even then that it couldn’t be applied mechanically. That was intimated, among other things, in a statement that the target was not to begin to apply fully until 1995, in order thereby to cushion the effects of the inflationary impulses that were predicted during 1993 and 1994 following the krona’s fall and the change in indirect taxes. There were also several occasions during the latter half of the 1990s when policy was not conducted slavishly on the basis of CPI forecasts. That was because it was obvious that it could result in absurd consequences.
By potential GDP, I mean the level of GDP that is compatible with a use of the available resources that is sustainable in the long term and that does not push up inflation. Resource utilisation may be either positive or negative. Potential GDP is often measured by using what is known as an HP trend. This is a statistical method used to show the underlying trend in GDP. By simultaneously trying to minimise deviations from actual GDP and to show the most even curve possible, the HP trend provides something in-between the often jagged curve which shows the actual GDP outcomes and a linear trend. An HP trend is a fairly good measure of the underlying longterm development in GDP during normal cyclical fluctuations. One problem with an HP trend as a measure of potential GDP is that its terminal point is normally close to the terminal point of the actual time series. This makes it a poor measure of potential GDP towards the end of the series. Often, it is precisely the terminal point that one is interested in. Another problem with an HP trend is that it is not a good measure if there are structural shifts in potential GDP – and it is natural to believe that such shifts take place in connection with a deep recession. These problems are clearly visible if one compares the most recent calculation of the GDP gap in the September Monetary Policy Update with the estimates made in real time.

12  BIS Review 130/2010  Figure 9 Shortage of labour in the business sector and unemployment Deviations from the average 2000–2007  Sources: National Institute of Economic Research and Statistics Sweden. Figure 10 The GDP gap and the RU indicator Percentage deviation from HP trend and number of standard deviations from the average  Note. Broken line denotes the Riksbank’s forecast MPU September 2010. Source: The Riksbank. BIS Review 130/2010  13  Figure 11 Industrial production, capacity utilisation and potential industrial production Per cent  * Calculated as industrial production x (average capacity utilisation 1996–2007/capacity utilisation). Sources: National Institute of Economic Research and Statistics Sweden. Figure 12 The RU indicator and HICP inflation excluding energy Per cent, deviation from average 1997–2007  Sources: Statistics Sweden and the Riksbank. 14  BIS Review 130/2010  Figure 13 CPI and CPIF inflation Annual percentage change  Note. The CPIF is the CPI with a fixed mortgage rate. The broken lines denote the Riksbank’s forecasts in MPU September 2010. Sources: Statistics Sweden and the Riksbank. Figure 14 Repo rate Per cent, daily data and quarterly averages  Note. Broken line denotes the Riksbank’s forecast in MPU September 2010. Source: The Riksbank. BIS Review 130/2010  15
I did subsequently enter reservations in favour of an increase in the repo rate several times in 2007 when the majority on the Executive Board decided not to increase it.9 The second thing is that I accepted such a low repo-rate path the first time we presented our own path in February 2007. This was just before the completion of wage negotiations for large parts of the labour market and it sent the wrong signal to the social partners; that is that wages could be significantly increased without consequences in the form of too high inflation. Wage expectations had then risen to the highest level since the mid-1990s. But we were too focused on all the work that was required to produce and decide on the repo-rate path for the first time for me to adequately realise the consequences of the decision. When visiting different venues to speak about monetary policy, I have often been asked why we raised the repo rate from 4.50 to 4.75 per cent in September 2008, just before the financial crisis hit Sweden with full force. The members of the Executive Board were divided on the issue, with three for (including me) and three against and Stefan Ingves had to use his deciding vote to push the decision through. I usually say that with the information we had at the time I would have made the same decision again.

Second, inflation gradually increased in 2007 and 2008 to over 4 per cent. Inflation increased rapidly even if the effect of rising mortgage rates is discounted. This was largely due to rising energy and food prices. These price rises, as I mentioned earlier, were rooted in the expansionary monetary policy and the high level of growth in the world as a whole. The impact of monetary policy comes after a considerable time lag and the rate of inflation we see in these years is affected by monetary policy in previous years (see Figure 7). Third, inflation expectations also increased. The fact that inflation expectations one year ahead increased is natural given that the measured inflation rate also increased. However, inflation expectations five years ahead can be interpreted as an indication of whether monetary policy is credible or not. As long as these expectations are close to the inflation target, then this is a sign that the respondents expect the Riksbank to attain its target in the long term. The fact the long-term inflation expectations increased to over 2.5 per cent was therefore more worrying (see Figure 8). Fourth, there was a rapid expansion of credit and a rapid increase in housing prices. Lending to non-financial companies and to households increased by 10–15 per year in the years preceding the crisis and house prices increased by around 10 per cent per year. The prices of tenant-owned apartments increased even more rapidly.
The low inflation as such has no doubt helped to make the economy function better. The conditions for a long, stable upswing have improved. Together with clearer price signals, this makes it easier for households and firms to plan and make decisions. The workings of the economy have also been improved by the tax reform, various deregulations and changes to social security systems. Competitive pressure has grown as a result of EU membership and the globalisation of trade. The result is discernible in a higher rate of capital formation and structural changes in the economy. In both 1994 and 1995 GDP growth topped 3 per cent. In 1996 the growth of final demand remained fairly high, 2.1 per cent, and the rate accelerated in the second half-year to 2.6 BIS Review 56/1997  -3-  per cent from the corresponding period the year before. Total production, however, did not match the growth of final demand, the reason being that firms chose to trim stocks. The growth of GDP, which represents total output, stopped at 1.1 per cent in 1996.

Under certain circumstances stock adjustments may trigger a more marked economic slowdown. This may happen, for instance, if effects of the adjustments either spread to private consumption or have a negative impact on the labour market and household confidence. The Riksbank was therefore alert to the risk of private consumption being weaker last spring and summer, which would have pointed to a further curb on inflation. In practice, however, private consumption went on rising in the summer and its growth became somewhat stronger in the autumn. Low inflation and interest rate reductions The rate of inflation decreased during 1996 and the rates that different economic agents expected in the future also moved down markedly (Diagram 2). This enabled the Riksbank to lower the repo rate from 8.91 to 4.10 per cent. As a result, the initial position for the ongoing growth phase in Sweden’s economy is more favourable than for many years. The drop in the rate of consumer price increases was appreciably accentuated by the Riksbank’s repo rate cuts in that these contributed to the reduction of mortgage interest costs. Under normal circumstances the tolerance interval around the price stability target should suffice BIS Review 56/1997  -4-  to absorb transitory effects on the price level. Last year, however, the fall in interest rates was very marked because many factors had a concerted effect that rapidly altered the picture of inflation. The magnitude of that interest rate fall is also largely responsible for the weak price trend to date in 1997.
Norman T L Chan: What does it take to build a “Hong Kong Brand” for financial services? Welcoming remarks and keynote speech by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, at the Treasury Markets Summit 2016, Hong Kong, 6 September 2016. *  *  *  Good morning, Ladies and Gentlemen, 1. Today I would like to talk about building Hong Kong as a “Brand” for financial services. So what is a “Brand” made up of? For merchandise goods, “quality” and “credibility” are two major components of a “Brand”. Quality 2. Quality means the product or services are suitably designed, structured and built to meet the needs of consumers/customers. In the field of fashion or luxury goods, customers’ taste is evolving all the time but very often the “Brand” actually takes the lead in shaping the trend. 3. In the context of financial services, the concept of “quality” entails the availability of a wide range of financial products that can adequately and effectively meet the needs of customers with vastly different financial needs. For individual customers, such products range from the basic banking services for the mass market, to very sophisticated private wealth management services for high net worth customers. For corporate customers, quality products range from the basic transactional banking for the SMEs, to the very diverse and sophisticated services in treasury, hedging, and equity and debt financing for the very large corporates. 4.

New concepts in various facial or voice recognition techniques could be demonstrated by the developers in the Fintech Innovation Hub to gather feedback from potential users and to receive regulatory guidance from supervisors at an early stage. This should help shorten the time-to-market of useful industry-wide solutions. Second, I envisage that the Fintech Innovation Hub will also benefit the HKMA. In this place, we could explore with innovators options and possibilities of using new technologies, such as Big Data Analytics and other “regtech” initiatives, to achieve our objectives  BIS central bankers’ speeches  3  more effectively without creating undue risks or burden for our internal systems or databases. Fintech Supervisory Sandbox 16. Meanwhile, there is also a quite commonly-held perception that the development of Fintech in the financial services sector in Hong Kong has been slow. I do not subscribe to this view, at least insofar as the banking sector is concerned. In the past few months, banks and stored value facility operators have already launched new payment facilities built on smart phones and Near Field Communication technology. These facilities have the potential of altering fundamentally the way consumers make payments. Many banks have also reported to the HKMA their intention to roll out very soon new technology with a view to providing more secure and efficient services to customers. I mentioned earlier biometrics authentication technology involving voiceprints and fingerprints. This is indeed something that many banks are planning to roll out.
They take independent decisions that they must account for publicly. This arrangement ensures both transparency and distribution of power. In addition, three Deputy Governors have taken office – in the fields of monetary policy, financial stability, and financial supervision – in order to ensure even more fully that the authority for decisions on application of policy instruments is distributed effectively. There has been complete consensus among us four Governors, as well as the other members of the Bank’s three committee, in our support of the measures taken in response to the COVID19 threat, and we have met at very short notice to discuss and approve measures when necessary. The Central Bank of Iceland stands together as a cohesive and united whole in the tasks that lie ahead. Unlike many other Western central banks, the Central Bank of Iceland has considerable scope for policy action, as interest rates here are higher than in many other economies and the capital requirements made of the banks are much more stringent than they are elsewhere. And we have used the scope this has provided us. In the past two weeks, the Bank has lowered interest rates by a full percentage point. Its key rate is now 1.75%, and we can lower it still further. We have lowered the banks’ liquidity reserve requirements, easing their liquidity position by 40 b.kr. We are ready to inject more liquidity into the system if the need arises.

2/4  BIS central bankers' speeches  Furthermore, we have lifted the 2% countercyclical capital buffer on financial institutions. The buffer has been reset to 0% and will remain there for at least the next two years. Lifting the countercyclical capital buffer requirement will make it easier for the banking system to support households and businesses by creating the scope for new lending in an amount ranging up to 350 b.kr., or 12.5% of the current loan portfolio, all else being equal. Moreover, it was decided this past Sunday, at an extraordinary meeting of the Monetary Policy Committee, to begin direct purchases of Treasury bonds in the secondary market. This will both support fiscal policy and ensure that lower interest rates are transmitted out the entire yield curve, thereby lowering households’ and businesses’ financing costs, which is the Bank’s objective. Honoured guests: In Iceland’s campaign for independence, currency issues were never mentioned. It was automatically assumed that Iceland would continue to participate in the Nordic currency union as an independent member, as the Norwegians had done after separating from Sweden in 1905. Participation in Nordic currency cooperation was actually written into the agreement made when Iceland was granted sovereignty in 1918. This currency cooperation was based on the gold standard, as were most of the world’s currencies at that time. However, the Nordic currency union fell apart during the post-war years, and Icelanders were forced to rely on themselves as they endured the shocks that pummelled the country during its first years of sovereignty.