samchain/econo-pairs-v1 huggingface dataset:
Excluding electricity and petrol prices and adjusting for changes in indirect taxes, price inflation was approximately 2½ per cent, which is in line with the current inflation target. It should be pointed out, however, that our adjustment of the figures may overestimate these effects. We assume, for example, that increases in indirect taxes are passed on in their entirety to the consumer. In practice, changes in indirect taxes are often shared by manufacturers and consumers based on the intensity of the supply-and-demand reaction to price increases. In addition, increases in electricity prices are not only the result of last year’s low precipitation levels in Western Norway and  BIS Review51/2001  3  higher electricity taxes. Other, more permanent conditions may also have contributed. The increase in petrol prices leads to higher prices on other goods such as transport services and we have not adjusted for this. However, adjusting inflation figures for direct effects of one-off factors can also be associated with pitfalls. Higher indirect taxes and an increase in petrol and electricity prices may be a source of accelerating inflation, via spillover effects on other prices and wages. Other countries with inflation targets adjust the consumer price index for temporary and random factors in a variety of ways. In the UK, changes in interest rates have a strong, direct impact on the consumer price index. The Bank of England aims at an inflation target that is adjusted for such effects.

Kevin Stiroh: A microprudential perspective on the financial risks of climate change Remarks by Mr Kevin Stiroh, Executive Vice President of the Financial Institution Supervision Group of the Federal Reserve Bank of New York, at the 2020 Climate Risk Symposium, Global Association of Risk Professionals (delivered via videoconference), 10 November 2020. * * *  Introduction Good morning and thank you for the opportunity to participate in GARP’s2020 Climate Risk Symposium. As shown by the strong turnout today, attention on climate-related financial risks is clearly growing within finance, both for the private sector and the public sector. Today, I’ll speak about these risks from a microprudential perspective—that is, the impact on specific financial institutions, particularly banks, and how firms are managing those risks. I’ll also provide a short update on some of the work under way through the Basel Committee’s Task Force on Climate-Related Financial Risks—the TFCR. Before proceeding, I’ll emphasize that I am speaking only for myself and not necessarily the Federal Reserve System or the Federal Reserve Bank of New York. Risk Management Perspective From a supervisory perspective, a primary focus is to ensure that banks operate in a safe and sound manner and manage risks so they are resilient to a range of shocks. As you know, the core of effective risk management includes identifying, measuring, and managing traditional banking risks like credit risk, market risk, operational risk, or liquidity risks. These risks can materialize from a range of shocks—a recession, a geopolitical event, or a bad actor. And climate change.
In the financial domain, the valuations of certain assets in some jurisdictions and segments of the capital markets have increased most markedly, suggesting that there has been an increase in the risk of there being corrections in the coming years potentially affecting financial stability. I would also like to refer to the economic risks posed by the political situation in Catalonia. In our Financial Stability Report, published early last November, the Banco de España estimated a range for the economic impact of the tensions in Catalonia drawing basically on assumptions about their duration and intensity. The conjunctural information for the final 5/6  quarter of 2017 indicates that economic activity is expected to have slowed in Catalonia in the closing months of the year to a greater extent than in the other main regions with the greater GDP; at the same time, it seems clear that the application of Article 155 of the Constitution has contributed to easing economic tensions, as shown by recent developments on financial markets, where a correction has been observed in the higher volatility and more negative dynamics that stock markets and the Spanish sovereign debt risk premium had experienced in the opening weeks of October. Indeed, the risk premium stood today below 85 basis points relative to the German benchmark, the lowest level since 2010, following the upgrade announced by a rating agency.

As I have said time and again, the best contribution that the Central Bank can make to the country’s development is to keep inflation low and stable, providing the grounds for sustainable growth. Thus, the Board will continue to guide its monetary policy so that projected inflation stands at three percent over a two-year horizon. Thank you. Figure 1 Inflation indicators  (annual change, percent)  12 10 8 6 4 2 0 -2 -4  12 10 8 6 4 2 0 -2 -4 06  07 CPI  08 CPIX  09  CPIX1  10  11  CPI w/o foodstuffs and energy  Sources: Central Bank of Chile and National Statistics Institute. Figure 2 Inflation expectations (percent) 7  7  6  6  5  5  4  4  3  3  2  2  1  1  0  0 06  07  08  09  EES at December 2011 FOS 2 year ahea (1) EES 2 year ahead  10  11  90  90  80  80  70  70  60  60  50  50  40  40  30  30  20  20 06  FOS 1 year ahead (1) EES 1 year ahead  07  08  09  10  11  Perceived IPEC inflation (2) IMCE costs in 3 months (3)  (1) Financial operators survey (FOS) of first half of the month.
Elsewhere, in credit to construction and real estate developers, bad debts are around five times greater. These mortgage default figures are somewhat more than one percentage point lower than those observed in the early 1990s, when we also had a recession combined with a real estate market crisis. And this is possible with the unemployment rate currently around 20%. The explanation for this is that interest rates on Spanish mortgages are currently below 3%, while in the early 1990s they were around 14%, with an unemployment rate close to 24%. The fact that the average loan-tovalue ratio stands at 62%, with only 3% of mortgages with an LTV above 100%, and the widely rooted wish in Spanish society to own one’s own house explain why the mortgage portfolio is, in fact, the least risky of all Spanish deposit institutions’ credit portfolios. Conclusions I could talk a good deal more about what we have done in Spain to tackle and resolve the problems of our banking system. But I believe it would be much more interesting to listen to your concerns and worries and try to allay them. I shall thus conclude that the steps taken by the Spanish government and Parliament on fiscal consolidation, labour market reform and pensions system reform, along with the changes I have explained to you in relation to savings banks and the strengthening of banking solvency, should – little by little, since confidence takes some time to pick up – afford us greater recognition by international investors.

Transparency and disclosure are very important but we believed it was not sufficient. We have thus been working closely with the Vice-President on strengthening our banks’ solvency. A result of this has been the recently approved Royal Decree-Law, which we believe is a definitive step and a crucial quantitative and qualitative leap forward in restoring market confidence in Spanish banks. The aims of the new Royal Decree-Law are very clear. The first is to reinforce the solvency of all our banks, requiring them a level of core capital of 8% and because the doubts of investors over a small group of unlisted banks with some need to resort to the wholesale market, we are demanding of such banks 10% of core capital. We publicly announced yesterday which banks need capital to reach the 8–10% level, and how much capital they need. We have given them fifteen days to submit a recapitalisation plan. Those intending to tap the markets will have until end-September to attain the new level of capital. But we have made it very clear that if a bank believes it will be impossible to reach these solvency levels, it can apply to the FROB for these funds. The capital shortfall is for a maximum of € million, whereby the impact on public debt if the FROB has to be used would be relatively limited.
McKinsey estimates that $ trillion worth of assets in the power sector could be retired or underutilised between now and 2050. Activities supporting lower-emissions products are likely to grow in importance, ranging from mining lithium for batteries to manufacturing solar panels and charging stations for electric vehicles. Demand will also grow for green services, such as forest management, sustainable engineering and design, green finance, and emissions measurement and tracking solutions. Fifth, inflation is likely to be higher during the long transition to net zero. Higher energy prices will feed through into the production of many goods, and prices overall will rise. The Bank of England estimates inflation will increase by nearly 0.6 percentage by the early 2020s if there is an orderly transition to net zero and 2 percentage points by the early 2030s if the transition is disorderly. We are probably seeing a preview of that scenario currently. But it's not just energy prices. Demand will surge for minerals such as copper, aluminium, cobalt, lithium, nickel, and rare earths, which are critical to various clean energy technologies, including wind turbines and electric vehicles. For example, solar or wind power plants use up to six times more copper than conventional power generation. According to the IEA, a world on track for net-zero in 2050 will need six times as much of these materials in 2040 as it does today. The result is greenflation, or rising prices for these metals and minerals that are essential to renewable energy and technologies.

In this respect, our baseline forecasts take the Medium Term Program as given and thus assume that fiscal discipline will be maintained. A revision in the monetary policy stance may be considered, should the fiscal stance deviate significantly from this framework and consequently have an adverse effect on the medium-term inflation outlook. We will continue to focus on price stability in the formulation of the monetary policy while preserving financial stability as a supplementary objective. To this end, we will carefully assess the impact of the macroprudential measures taken by the CBRT and other institutions on the inflation outlook. We are of the opinion that strengthening the structural reform agenda that would ensure the sustainability of the fiscal discipline and reduce the saving deficit would support the relative improvement of Turkey’s sovereign risk, and thus facilitate price stability and financial stability in the medium term. This will also provide more flexibility for monetary policy and contribute to social welfare by keeping interest rates of long-term government securities at low levels. In this respect, I would like to end my remarks reminding you the  10  BIS central bankers’ speeches  importance of the steps towards implementation of the structural reforms envisaged by the Medium Term Program. Thank you very much for your participation. BIS central bankers’ speeches  11
The fact that the equilibrium real federal funds rate is likely to be lower for a long time underscores the need for caution in applying the benchmark Taylor Rule as a guide to the appropriate stance of monetary policy. As typically applied, the Taylor Rule assumes an equilibrium real rate of interest of 2 percent. This seems much too high in the current economic environment in which headwinds persist, and somewhat too high even when these headwinds fully dissipate. The next question I wish to consider is how the Fed will likely manage its balance sheet as the taper process is completed and lift-off eventually occurs. Unlike previous normalizations of monetary policy, which only involved the level of short-term rates, this prospective tightening cycle also involves considerations with respect to the size and composition of our balance sheet. The Committee stated in its June 2011 exit principles that changes in shortterm rates will be the primary means for adjusting monetary policy post-liftoff, not discretionary shifts in the balance sheet. In other words, the balance sheet will be set on automatic pilot. I believe this approach still very much applies. However, the language in the June 2011 exit principles concerning agency mortgage-backed securities (MBS) sales no longer applies.

Until economic growth is able to significantly reduce unemployment, the authorities should not become complacent in their efforts to continue the structural and institutional reforms essential to overcome the crisis. It is clear that for the successful completion of the rebalancing process Europe needs more investment and higher domestic demand growth. We therefore need a more coordinated approach to macroeconomic policy at the euro area level to achieve higher demand growth,  BIS central bankers’ speeches  5  as well as the continuation of structural reforms in all member countries in order to increase growth and facilitate a more encompassing rebalancing process. At the same time, to support national structural reforms in stressed countries, the enactment of the announced contractual programmes with financial means to support their implementation should play a significant role. Finally, it would be important if a future decision could be reached to implement at the euro area level what is referred in the President Van Rompuy’s Report “Towards a genuine Economic and Monetary Union” as “….the establishment of a fiscal capacity to facilitate adjustment to economic shocks. This could take the form of an insurance-type mechanism between euro area countries to buffer large country-specific economic shocks. Such a function would ensure a form of fiscal solidarity exercised over economic cycles, improving the resilience of the euro area as a whole and reducing the financial and output costs associated with macroeconomic adjustments”.
Latvia  0  99.5  64.5 58.5  55.9  50 40 30 20 10  Baltics  CEE  EU28  Macedonia  Croatia  Bulgaria  European Union  Slovenia  Lithuania  Latvia  Estonia  0  SEE  Source: Eurostat. To depict more closely the state of the SMEs and the own perception of their business environment, in the next section we will focus on the results of the Survey on the Access to Finance of Enterprises (SAFE survey of the EC and the ECB). The Survey itself pinpoints the concentration of SMEs in trade and services (around 70% on average, both for the EU and the region), with many of the companies not having export of goods and services in their total turnover (around half of surveyed companies). The survey data also indicate that SMEs from the EU and the region face rather similar challenges in terms of the main perceived obstacles in doing their business. Finding customers and availability of skilled labor seem to be the main issues of the SMEs from the European Union and from the region. Thus, 7-8% of the companies perceives access to financing as the most important current problem, but there are countries, Macedonia in particular, where this percentage is higher (13%), and with a similar weight compared to most of the other obstacles7.

The Yellen camp’s view is that the Phillips curve looks largely as it normally does or, at any rate, has changed so little that it still works as an effective channel through which central banks can influence inflation. According to the Borio camp, the Phillips curve has instead almost broken down or, at any rate, changed so  9 [20]  much that it no longer forms a central part of the inflation process. More specifically, high resource utilisation no longer results in higher inflation, according to this view. Instead, it is claimed, inflation is highly influenced by structural factors. Factors often emphasised as exerting downward pressure on inflation are globalisation and, looking forward, more and more digitalisation. 14 These are arguments that those who have followed the debate in Sweden in recent years will recognise. According to this view, the central banks will find it difficult to steer inflation for a long time to come. As I mentioned in my introduction, taken to its conclusion, this means that it is pointless to set up targets for inflation, as this is mainly determined by factors outside monetary policy. As I also noted earlier, the Yellen camp does not share this view but believes that inflation targets are meaningful, important and possible to attain. Implications of the Swedish experiences What view, then, should we take of the international debate in light of our experiences here in Sweden? As I see it, our experiences overall are more in line with the Yellen camp's view.
For example, Table 1 shows the peak-to-trough fall in a proxy for “social consumption” – spending in pubs, restaurants, cinemas etc – based on Google searches across a range of countries. This is one of the categories of spending likely to have been hit hardest by social distancing measures. It suggests peak-totrough falls of 50-90% in social spending, across a wide range of countries, in the early months of the year. Fast indicators for the UK point to a similarly precipitous fall over the same period. Table 2 looks at the peak-to-trough falls in household spending using CHAPS payments data.4 These lie anywhere between  3  For example, Hacioglu, Känzig and Surico (2020), Carvalho et al (2020), Chetty et al (2020) and Aaronson et al (2020). CHAPS is a sterling same-day payment system that is used to settle high-value wholesale payments as well as time-critical, lowervalue payments like buying or paying a deposit on a property. Further detail on how these data can be used to track the economy can be found below in Chart 8. 4  3  All speeches are available online at www.bankofengland.co.uk/speeches  3  50% and 80% for all spending other than on staples (such as food and rent). Social spending fell as much as 80% while delayable spending, which includes clothing, household goods and cars, fell by around 50%.

Firstly, the role of maintaining economic stability that I described earlier in this talk, as stability is a prerequisite to structural changes that lift productivity. Secondly, the developmental role, a form of supply-side policies, to enhance financial sector efficiency and create a favorable financial environment for investment that would lead to higher productivity growth. The importance of financial markets has long been realized by the Bank of Thailand as being the crucial part of growth potential. Indeed, our annual economic symposium this year, “Rethinking Finance for Sustainable Growth”, will discuss the links in detail. A healthy financial market can distribute funds to the parties that can bring most value out of them. For example, investors in the stock market closely monitor businesses, and will withdraw funds from those that have low prospects of future growth, moving them to those with better prospects. The growth prospects will be realized, and in aggregate will improve the whole economy’s growth potential. A well-developed financial market also lowers the cost of raising funds, as the increased competition broadens the variety of financial products offered. An SME for example, whose credit-worthiness is difficult to assess compared to a corporation, might be limited to self-funding in a less-developed market. But in a well-developed financial market, corporations can turn to other channels, leaving commercial banks more incentive to serve SMEs. In 2004, Financial Sector Master Plan Phase 1 was adopted and, to continue improving the financial sector, Financial Sector Master Plan Phase 2, the current phase, was launched in 2010.
Conclusion There are clearly several good reasons why sound regulatory and oversight practices remain vital for the stability of our financial system and why, therefore, the Central Bank of Malta and the MFSA must work more effectively together. It is also evident, however, that on their own these two institutions cannot provide full protection against systemic disturbances, and that the modalities for co-operation which are in place locally need to be strengthened further and extended to other bodies with comparable responsibilities at the international, and particularly at the EU level. 3  ECB. 2002. Financial Sectors in EU Accession Countries. BIS Review 50/2004  5

This limit ensures that banks still have to borrow from the Eurosystem at the monetary policy rate set by the Governing Council. Here is where the ANFA comes in. Its purpose is to limit the size of the NCBs’ non-monetary policy portfolios, net of the related liabilities, and thus to ensure that the Eurosystem can effectively implement the single monetary policy. Of course, when performing national tasks, the NCBs must comply with the Treaty including the prohibition of monetary financing. Moreover, if these tasks were to interfere with monetary policy in any other way, they can be prohibited, limited or have conditions placed on them by the Governing Council. The publication of the previously confidential ANFA text was a unanimous decision of the ECB and the NCBs in the Eurosystem to live up to our commitment to be transparent. This publication should resolve misunderstandings about ANFA. In particular, it clarifies that the sole purpose of ANFA is to set limits for non-monetary policy operations related to national tasks of the NCBs, which they are allowed to conduct according to the Treaty. Nothing more and nothing less. These limits ensure that the NCBs’ operations do not interfere with the objectives and tasks of the Eurosystem and, in particular, with the single monetary policy. BIS central bankers’ speeches  3  Finally, complementing the information on ANFA, the ECB also published data on the Eurosystem’s aggregate net financial assets. The NCBs will follow suit and disclose their respective net financial assets when publishing their annual financial accounts.