samchain/econo-pairs-v1 huggingface dataset:
Inflation and inflation risks Inflation developed in line with expectations during the first quarter of this year. Our March forecast was 2.4%, whereas actual inflation was 2.5%. Nonetheless – as you can see from the charts – we are forecasting higher and more persistent inflation for the rest of the year. However, it should drop back below the 2% level from the beginning of next year, although there are significant risks attached to this relatively favourable forecast. A more pronounced price surge would clearly be a concern should there be a further increase in the prices of energy and food. In addition, it is possible that movements in the Swiss franc will not contribute to easing upward pressure on import prices. Having said that, we should also not underestimate the potential for movements in the prices of raw materials to reverse, and inflation pressures to abate in the event of a pronounced global economic slowdown, especially as we do not yet know the consequences of the financial market turbulence. Today’s monetary policy decision reflects our assessment of these different risks. Monetary policy decision Inflation has exceeded the 2% mark since December 2007. However, in our view this situation is temporary and the expected slowdown in the economy should have a moderating effect. We are expecting that inflation will already move back below the 2% level in 2009.

First, the Swiss franc has depreciated by 3% against our 26 most important trading partners, thereby partially offsetting the appreciation that occurred at the beginning of the year. This softening is having a direct impact on inflation, by increasing the prices of imports. To give an example, the impact of oil prices on inflation has been amplified, with the price of a barrel of Brent crude rising 18% by mid-May in terms of Swiss francs, but only 13% in terms of US  2  BIS Review 80/2008  dollars. In the longer term, the weakening in the Swiss franc is indirectly contributing to the increase in prices by stimulating demand. Second, real short-term interest rates have dropped. There has been a rise in expected inflation for the near future and this means – for given nominal interest rates – lower real expected yields for short maturities. An analysis of monetary conditions in terms of volumes leads to similar conclusions. Let us begin with money, which is the best indicator to use if a broad-brush and long-term outlook for the economy and inflation is required. The M1 and M2 monetary aggregates, which were declining until not long ago, have been practically stable for some months. As for M3, it is continuing to exhibit moderate growth. The sub-prime crisis has confirmed the importance of mortgage loans as an indicator of the degree of relaxation of monetary policy. The reason for this is simple.
Let me now highlight some challenges to be globally faced by banks and supervisors in implementation of Basel III:   Firstly, Base III has substantially raised the quality, quantity and international consistency of capital and liquidity. The new rules are aimed at strengthening of capital and risk management in banks. This may require banks to inject high quality fresh capital, preserve existing capital by limiting the payout of dividends and bonuses, realize efficiency gains, and mobilize liquidity from new sources in certain jurisdictions to meet additional capital and liquidity requirements. This would be a major challenge for some internationally active banks, particularly under present market conditions;    Secondly, internationally active banks facing major capital shortfalls will have to revisit their business strategies on global presence and expansion plans. They might be required to take some tough decisions on exiting from certain locations or considering merger and consolidation of their affiliates and subsidiaries;    Thirdly, implementation of Basel III will require banks to assess their existing capacity on estimation of additional capital and liquidity requirements. This may also require some banks to make additional investment in systems and procedures to build-up their capacity;    Fourthly, new capital and liquidity rules are conceptually and technically very demanding.

This will require banks and supervisors to undergo extensive trainings to learn these new concepts and techniques;  2  BIS central bankers’ speeches    Fifthly, given the scarce availability of qualified human resources, banks and supervisors will face the challenge of attracting and retaining staff with appropriate skill sets;    Sixthly, meeting the additional regulatory requirements relating to Basel III implementation will require banks to reassess their existing regulatory reporting and compliance structure to ensure its adequacy. This is important given the extended transitional timeline for implementation, during which some banks are required to participate in quantitative impact studies while others will have to prepare for full implementation within specified timeline. We also have to keep in mind that new rules are still evolving in certain areas based on the results of quantitative impact studies and thus may require further adjustments in the current regulatory requirements;    Lastly, and the most important step to be taken by banks, is adopting the robust governance structure that best suits their business model and risk profile. The Board of Directors should have a clear understanding of their role in corporate governance and be able to exercise sound and objective judgment about the affairs of the bank. The senior management should ensure that the bank’s activities are consistent with the business strategy, risk tolerance/appetite and policies approved by the board. This is the cornerstone on which any effective risk management framework, sound incentive structure and robust governance arrangements must be built.
Since the start of 2013, inflation had drifted consistently away from the ECB’s target rate of below but close to 2% over the medium term, reaching levels below 1%. Without counteracting measures, this low inflation could have turned into a deflationary spiral which would have deepened our economies’ woes 1/5  BIS central bankers' speeches  considerably. It was against this macroeconomic background that the ECB took decisive policy action to maintain price stability in the euro area as a whole, in line with its mandate. In normal times, when inflation is above target, central banks raise the key interest rates to rein it in. When inflation is below target, they lower the key interest rates to stimulate economic activity and induce an increase in inflation. However, at the start of 2014, the deposit facility rate had already been brought to zero. At the same time, financial fragmentation in the euro area was hampering the transmission of our policy, as our monetary policy impulses were not evenly transmitted across countries or adequately along the yield curve. So in order to provide additional monetary accommodation and to support the recovery in credit, the ECB used a range of nonstandard measures to meet its inflation objective. These include a negative deposit facility rate, targeted longer-term refinancing operations, forward guidance and asset purchases. Net asset purchases currently amount to € billion per month, and are intended to run until the end of December 2017, or beyond, if necessary.

Ladies and Gentlemen, with these few remarks I hereby declare this workshop officially open. I thank you for your attention. 2  BIS Review 51/2010
I would also like to take the opportunity to express Norges Bank’s views on how the Fund’s strategy can be further developed. The Fund’s investment performance, which receives a great deal of attention, is primarily determined by the allocation of assets across different classes such as equities and bonds. Asset allocation is an important component of the Fund’s strategy. Chart: Timeline for managing Norway’s petroleum wealth After Norway discovered oil in the North Sea in 1969, it became clear early on that this would be a source of substantial wealth. The revenue would transform Norwegian society 3 . In 1983, the Committee on the Future of Petroleum Activity 4 – chaired by Hermod Skånland who was appointed central bank governor in 1985 – launched the idea of an oil fund. The proposal was to set up an equalisation fund. According to the Committee, government oil revenues would be transferred to the fund. Each year, an average of the past years’ oil revenues would be transferred to the central government budget and spent on a par with other revenues. 1  Jeffrey Sachs and Andrew Warner (1995): “Natural Resource Abundance and Economic Growth”, NBER Working Paper 5398. 2  Halvor Mehlum, Karl O. Moene and Ragnar Torvik (2006): “Institutions and the resource curse”, The Economic Journal 116, pp. 1–20. 3  See for example Report no. 25 (1973–74) to the Storting: “Petroleumsvirksomhetens plass i det norske samfunn” [The role of petroleum activity in Norwegian society]. 4  NOU (Official Norwegian Report) 1983:27 “Petroleumsvirksomhetens framtid.

We have also pointed to possible improvements to the investment guidelines for the Fund. The fixed income portfolio has a number of weaknesses. We have learned that we should not necessarily invest most in those companies and states that are the most eager borrowers. Large borrowers thus have a high weight in the portfolios. Our assessment is that the fixed income portfolio should instead be weighted based on the income that is to service the debt. The GDP-weighted alternative is the most relevant alternative for government debt. Both the equity and fixed income portfolios are constructed using regional weights. Today’s distribution was partly determined using Norwegian import weights from the mid-1990s. It should be considered whether the regional weights should no longer be used so that the Fund’s holdings across all companies and recognised markets are of equal size. If regional weighting is discontinued, the share of the Fund’s European equity and bond holdings will be  13  See “Norges Banks aktive forvaltning av Statens pensjonsfond utland” [Norges bank’s active management of the Government Pension Fund Global], letter to the Ministry of Finance of 23 December 2010. 14  “Utvikling av investeringsstrategien til Statens pensjonsfondutland” [Development of the investment strategy for the Government Pension Fund Global], Norges Bank’s letter to the Ministry of Finance of 6 July 2010. 6  BIS Review 145/2010  reduced. Investments in the Americas and Asia will then increase. With such a revision, the stability of economic and political systems must also be assessed.
Going forward, IBF will continue to take a proactive role in promoting best practices and thought leadership in talent management strategies. On thought leadership, I am delighted to warmly welcome our keynote presentation speaker Professor Ronald Collard for this year’s Annual Conference. Professor Collard will speak on the topic of “Talent Strategies for Sustained Profitable Growth”. I believe you will learn much from Professor Collard’s extensive experience and expertise in the area of talent strategies. I also wish to thank the panelists, David, Richard, Robert and Mark for their participation, and look forward to a lively discussion later. 2  BIS Review 81/2008  As IBF management is quite confident that Professor Collard and our panel of speakers will whet your appetite for more learning, I am pleased to announce that we will be holding the Beacon Series for HR Professionals in October and the Distinguished Speaker Series for business leaders in November. The year ahead will be exciting. Many of you have contributed to IBF in various ways. I wish to thank my fellow Council members, the FICS Steering Committee, the FICS Working Group members, and FICPs for your contribution to promoting the FICS framework.

See Section 13(3) of the Federal Reserve Act (12 USC 343) and Regulation A (12 CFR 201.4(d)). BIS central bankers’ speeches  5  In the U.S., given the restrictions on central bank lending, if a securities firm were to lose access to funding the remaining options available would be finding a means of replenishing the firm’s capital, selling assets, or selling all or part of the securities firm’s operations. While this might be manageable in the case of a firm-specific idiosyncratic shock, it might prove more difficult if a common shock was broadly hitting the securities industry. In this circumstance, the failure of one firm could increase the stress on other firms that were facing similar difficulties. If all of the requirements for Section 13(3) are met, the central bank could provide liquidity support. However, since this is not a certainty, it is worth considering possible alternatives. Now that all major securities firms in the U.S. are part of bank holding companies and are subject to enhanced prudential standards as well as capital and liquidity stress tests, providing these firms with access to the Discount Window might be worth exploring. To me, this is a more reasonable proposition now than it was prior to the crisis when the major dealers weren’t subject to those safeguards.
Some countries are experiencing only a temporary surge in inflation and might just wait out until it ends. Contrastingly, other economies, including Russia, are facing a rise in inflation expectations. Therefore, no response from central banks could undoubtedly exacerbate the inflationary spiral, while the effect of accommodative policies on growth has been mostly exhausted already. Concerns about inflation are aggravated by worries about a faster tightening of global financial conditions. Largest economies’ central banks are now close to the limit in their ultraaccommodative policies pursued for multiple years. If the surge in inflation is not temporary and persists, central banks will be forced to respond. If they tighten their policies, this will cause capital outflows from emerging markets. Rising volatility will certainly affect the economy. Changes in the labour market also speed up inflation. Moreover, this does not seem to be a temporary factor. As the development of digital services, remote work, and online trade has accelerated, the demand for some professions is declining, while the demand for others is growing. Therefore, unemployment that has risen during the crisis period might be structural in nature: staff shortages in some sectors might be coupled with higher unemployment rates in other industries. This might induce proinflationary pressure, even if unemployment stays close to prepandemic rates. What does this mean for our monetary policy? 1/7  BIS central bankers' speeches  Firstly, Russia is one of the countries where the economy is bouncing back fast and has almost reached its pre-crisis level.

It will require large investment and the development of new green technologies which are more expensive. Moreover, regulation, including tax measures, implemented by various countries will impact the value of Russian exports. The global transition to the green economy might reduce the export potential of a part of Russian enterprises, while expanding the potential of others. In this regard, it is critical not to miss the moment of a turnaround in the economy and, accordingly, the financial sector as well. Besides challenges to future growth, we now need to consider financial stability risks especially closely as they have intensified during the pandemic. As we know, there are many countries and companies that have accumulated enormous debts. It was not that hard to service them when interest rates were low. However, an increase in interest rates might alter the situation dramatically. A number of countries and the global economy in general might face new financial problems, a wave of bankruptcies, and rising market volatility. We are not able to influence these processes, yet we are capable of mitigating their implications for the Russian economy and can reduce its sensitivity to possible global upheavals. To this end, it is vital to avoid the accumulation of internal mismatches and prevent any bubbles in the market. Currently, we are especially closely monitoring retail and mortgage lending in the banking sector. According to our estimate, growth in mortgage lending might exceed 20% as of the end of the year.
The economy is more or less at full employment, consumption has rebounded, and household income growth has recovered to near pre-crisis rates. The problem with the US recovery, at least from the perspective of Singapore and the region, is not its pace of growth but its composition. US GDP growth is not generating as much trade as previously, with persistent weaknesses in business investment, including in IT. This has implications for export growth in Asia and in Singapore. US consumption generates only around two-thirds the import demand that US investment does. So for Asia and Singapore, we need to see a recovery in US investment. BIS central bankers’ speeches  1  China’s growth should slow but we do not expect a “hard landing”. The official target of 6.5% is quite attainable on the back of fiscal stimulus and continued credit expansion. In fact, the risk is not of too low a growth rate but a growth rate that is achieved by adding to the underlying vulnerabilities in the Chinese economy: high and rising levels of corporate debt, industrial over-capacity and deteriorating asset quality in the banking system. Changes in the composition of China’s growth will continue to have an impact on Asia and Singapore. The rebalancing of demand away from investment and towards consumption has weighed on the region’s exports of commodities and capital goods. But over time, there are opportunities for countries which re-orientate the structure of their exports to tap on China’s burgeoning demand for consumer goods and services.

Macroprudential policy – car loans and property loans While monetary policy is focused on overall price stability, macroprudential policies target specific areas to promote economic and financial stability. The two key macroprudential measures taken in recent years relate to the property market and car market. In the property market, MAS has implemented prudential limits on loan-to-value, loan tenure, and debt service ratios while the Ministry of Finance has implemented stamp duties on buyers and sellers. This collection of measures is the so-called property cooling measures. In the car market, MAS has implemented limits on loan-to-value and loan tenure. MAS eased the limits on car financing in May this year. But it is not time yet to ease the property cooling measures. The considerations and circumstances in the two markets are quite different. The restrictions on car financing were imposed in 2013 – at a stringent level – primarily to restrain the strong demand for cars and COEs, and consequential pressures on inflation. The objective of curbing inflationary pressures has been achieved. The contribution of private road transport (excluding petrol) to headline inflation has eased from +1.3% points in 2011– 2012 to –0.5% point in the first quarter of this year 2016. MAS therefore reset the car loan restrictions in May this year at a level that would continue to promote financial prudence and support the move towards a car-lite society over the long term.
Furthermore, market participants would hardly regard monetary policy decisions as credible, should these decisions involve a substantial expansion of the balance sheet, which in turn would impair the effect of monetary policy. It is unlikely that decisions such as the introduction of the minimum exchange rate or the stabilisation of UBS would have been made in the same way given these circumstances. This constraint on the capacity to act would not be in Switzerland’s interest. Gold is nevertheless an important component of the SNB’s assets. However, this is not because gold guarantees price stability. In today’s monetary system, there is no direct connection between the proportion of gold on the SNB’s balance sheet and price stability. This is also evidenced by the fact that the objective of price stability has been better achieved in recent years, even though the proportion of gold on our balance sheet was smaller, than at times when gold accounted for a much larger share. A high proportion of gold on the balance sheet is no guarantee for price stability. There is another reason why gold is useful for the SNB and Switzerland. As part of a good diversification of currency reserves, a certain proportion of gold can help reduce the balance sheet risk. We have therefore never ruled out the possibility of future gold purchases. At the same time, however, gold is also one of the most volatile and thus riskiest investments. A high proportion of gold would increase the SNB’s balance sheet risk.

In our baseline scenario for the global economy, we expect growth in the coming quarters to remain in line with potential. In the advanced economies, expansionary monetary policy is lending support, as is fiscal policy in some countries. Inflationary pressure is likely to remain moderate. The risks to this baseline scenario for the global economy are still to the downside. However, they are more pronounced than at our previous monetary policy assessment. Chief among them are political uncertainty and trade tensions, which could lead to renewed turbulence on the financial markets and a further dampening of economic sentiment. Swiss economic outlook  I shall now turn to the economic outlook for Switzerland. The Swiss economy also gathered momentum at the beginning of the year. According to the initial estimate, GDP grew by 2.3% in the first quarter. Growth was broad-based across the different sectors of the economy. Labour market developments were also positive. Employment figures continued to rise, and the unemployment rate remained stable at a low level. Production capacity in Switzerland was well utilised overall. As regards the developments in the second quarter and the months thereafter, the surveys and leading indicators are currently presenting a mixed picture. All in all, however, they point towards momentum remaining favourable. Even in manufacturing, which is likely to be affected most directly by weaker industrial activity, expectations are that the business situation will continue to improve. Companies’ plans regarding capital spending and recruitment also remain positive, which offers further grounds for confidence.