samchain/econo-pairs-v1 huggingface dataset:
The strength of these effects is likely to diminish slightly during the forecast period, as a pick-up in global resource utilisation leads to higher international price pressures. Neither do we believe that the krona will appreciate as much in the period ahead. The overall assessment is that inflation will rise in the coming years, but at a fairly moderate pace. For the larger part of the forecast period inflation is expected to be below 2 per cent. Our forecast is that the twelve-month change in the CPI will be 1.5 per cent in one year and 2.2 per cent in September 2007. The corresponding forecast for underlying inflation UND1X is 1.2 per cent and 1.8 per cent, respectively. The question then is what this entails for monetary policy. What is clear is that the low inflation has meant that monetary policy has been highly expansionary for a rather long time. This, of course, has helped stimulate economic activity and contributed to the firm economic growth. It also has had consequences for, among other things, developments in house prices and households' debt situation. As I observed earlier, the assessment in the Inflation Report’s main scenario is based on the technical assumption that the repo rate will develop in line with implied forward rates. It must be emphasised that the assumed interest rate path should not be interpreted as reflecting the path the Riksbank considers to be most desirable.

Of course, I was a little uncertain as to whether I should just be pleased about this. But I think there is reason to be; it shows namely that we have a monetary policy regime which is stable and not dependent on single individuals. Inflation targeting – some thoughts on the future As I have mentioned, the macroeconomic outcome for Sweden has been relatively good over the past decade. Of course, this does not prevent there being questions worth discussing and much that can be improved. This also applies in the field of monetary policy. An important question in this context is what one can expect from monetary policy. If the expectations are excessive, there is a risk they will lead to the wrong issues being discussed and, if the worst comes to the worst, to political discontent that will undermine the current monetary policy system. Reasonable expectations According to the Sveriges Riksbank Act, the Riksbank is to safeguard price stability. We have chosen to implement this by keeping inflation at a target level of 2 per cent. The fact that the legislator has been clear that low inflation should be the target for monetary policy and nothing else, such as high growth or low unemployment, is because inflation is the only factor the Riksbank can govern in the long term. It is therefore unwise, and perhaps even counterproductive, to give a different impression.
Even with the improvements of the past few years, including under the auspices of SWIFT, there is still considerable potential for efficiency gains. At the same time, new money and payment systems entail a number of challenges. Individual users will face new security risks. Privacy may be at issue. If they become large enough to attain market power, these systems may become a source of systemic risk. For some countries that are vulnerable to a transition to payments in foreign currency, national room for manoeuvre and the ability to conduct monetary policy may be weakened. Norges Bank is currently assessing whether the existing regulatory framework, such as the emoney rules, is an adequate response to the challenges these new systems raise. The new systems may either fall outside the scope of the existing framework or they are not sufficiently addressed by it. We must therefore consider adjustments to the rules and whether new regulations are needed. It is likely that a broader collaborative effort among policymakers at both national and international levels is needed to formulate a robust response. Another possible response to new private digital currency is a central bank digital currency. The 4/5  BIS central bankers' speeches  central bank money currently available to the public takes the form of banknotes and coins. Cash has important attributes. It needs to be available and easy to use in order to fulfil its role in the payment system.

I said at the outset that a nation needs an efficient and secure payment system. If it does not function, that nation’s currency will lose its place in the monetary system. And therefore, for every central bank that issues a currency, it is important to govern and control developments in the payment system. This is the core issue: Only Norges Bank can provide final and secure settlement in Norwegian kroner. This will be the fundamental tenet for ensuring that the payment system in Norway continues to be efficient and up-to-date. 5/5  BIS central bankers' speeches
This is particularly evident in foreign exchange and financial markets, where exchange rates and interest rates are influenced when participants shift large amounts partly on the basis of their expectations concerning economic policy and economic developments. Financial market expectations concerning economic policy are entirely different today from what they were 20-30 years ago. Behaviour can change from being very rational to herd behaviour. The issues that receive attention, and that govern movements in exchange rates and interest rates, change. It is thus important that the authorities do not sow doubt, but on the contrary act in a predictable manner within a long-term framework. The authorities must be credible and inspire confidence. There must be consistency between the stated objectives of economic policy and what is actually done to achieve them. This is the most important reason why the implementation of monetary policy has been delegated to the central bank in Norway, as has been the case in other comparable countries. In Norway, the responsibility for interest rate decisions was delegated to Norges Bank through the 1985 Norges Bank Act and through the application of the Act in 1986. Developments in economic theory have also had considerable influence in this context. Seminal studies on economic policy guidelines were conducted by Finn Kydland and Edward Prescott at the end of the 1970s.6 These studies are based on the assumption that economic agents do not make systematic errors in their assessments of what the authorities are planning for the future.

It should be a tool of last resort, to be used only when there is a clear risk of deflation. With a long-lasting, very accommodative monetary policy, side effects and risks emerge. And while pursuing price stability is the main objective, we also have to keep in mind the costs – and not only the benefits – of our monetary policy measures. What danger does the row between Rome and Brussels over the Italian budget present for the country’s banking system? As a banking supervisor it’s not our task to comment on political discussions or decisions with regard to the budgets and fiscal stances of individual countries. Banks have to acknowledge changes and risks in the macroeconomic environment they operate in. And if these changes are relevant, we as supervisors adapt our assessment of banks’ risk profiles, too. Overall, the Italian banking system has become more resilient and banks are better equipped to deal with uncertainties than they were before. What do you see as the top priority for banking supervision in the coming months and years, in Italy and elsewhere? Among other topics, there is still further work to do on non-performing loans. They will keep us busy for the coming years. The cleaning up of banks’ balance sheets should be pushed through as quickly as possible. This is not specific to Italy. All banks should do their utmost to improve their resilience in sunny times when the economic cycle is on the upside.
But there’s something wrong. Interest rates are on the wrong side of the argument! They are too low, not too high, even if we assume that the equilibrium real interest rate is zero. Chart 5  Chart 6  Neither does international comparison suggest that Iceland is off the charts. Chart 5 shows a comparison of the real policy rates in a number of countries, based on the most recent interest rate decisions and the most recent twelve-month inflation figures. Iceland is 4  BIS central bankers’ speeches  somewhere in the middle. In Chart 6 we see several industrialised countries. Iceland is at about the same level as Sweden. Interest rates are higher in countries that are further along in the business cycle and have less slack, and they are lower in countries where the slack is greater, monetary policy is more credible, and long-term inflation expectations are near target in spite of higher current inflation. Chart 7  Chart 8  Finally, I show charts that illustrate, on the one hand, nominal GDP growth as forecasted for 2011 and, on the other, the current nominal policy rate. Some have posited that monetary policy should aim at keeping nominal GDP growth as stable as possible at a level that, in equilibrium, would deliver a desirable inflation target. I have certain doubts about how this would work in practice, but that is beyond the scope of my speech today.

Therefore, it was forecast that inflation would fall below 2% as 2011 progressed and then rise back to target by the end of 2013. As always, it was emphasised that the outlook was uncertain – which indeed proved to be the case. So where do we stand now, a year later? I think the big picture is this: economic recovery has materialised, while stability has proven more elusive. GDP growth this year will be slightly over 3%, which is above the forecasts from a year ago, largely due to changes in inventories and a smaller-than-forecasted contraction in public consumption. GDP growth is projected at 2½% annually for the next three years. I wouldn’t be surprised if it proves higher for 2011, once final figures are in a few years from now. The most recent Monetary Bulletin contains a discussion of forecasts and forecasting errors, which shows that final figures on investment and GDP growth tend to lie above the first figures. Employment has been increasing, and unemployment has fallen. It is cause for relief that the Directorate of Labour’s analysis indicates that most people leaving the unemployment register at present are going back to work. On the other hand, my concerns from last year concerning the low investment level and relatively weak export growth have not disappeared.
At the margin, they put downward pressure on U.S. interest rates and upward pressure on other asset prices. Through this effect, the monetary policy regimes that prevail in parts of the world help explain at least part of the persistence of these anomalies. Recognizing that we live in a world where major exchange rates do not move freely against the dollar, means that the dollar is not as flexible as we tend to think. And understanding that the effort to sustain these exchange rate regimes has required more expansionary monetary policy in those countries than would otherwise have been the case helps identify a substantial source of what market participants describe as very ample liquidity in world markets. The size of this effect is difficult to estimate with confidence. The economies that are the source of these flows are in aggregate a substantial part of the world economy, and the collective flows from official sources are probably large enough to have some impact on U.S. interest rates. Research at the Federal Reserve and outside suggests that the scale of foreign official accumulation of U.S. assets has put downward pressure on U.S. interest rates, with estimates of the effect ranging from small to quite significant. What does this mean for policy? Here are several implications. First, this pattern of exchange rate and monetary policy arrangements and the associated scale of official intervention in markets complicate our ability to assess the underlying economic conditions in our economies and to forecast the future path of output and inflation.

Many of these implications are positive, for the benefits of integration over time are powerful and compelling for all economies. In important ways, economic integration may have made the principal job of central banks easier, by contributing to productivity growth and reducing some sources of inflation pressure, at least during the transition when a large share of the working age population of the world is being brought into the market. But the process of change in how economies and financial markets interact also complicates the task of central banks. Our understanding of the how these changes affect our capacity to forecast economic activity and inflation and our ability to assess how monetary policy affects the economy almost certainly lags the changes underway. In my remarks today, I will talk about some of the implications of these challenges for the conduct of monetary policy. I will focus on two features of what is happening in the world economy and financial markets today that are among the most interesting and consequential of the many questions we face today in thinking about the changes in the world economy and the task of central banking. These are, first, the behavior of forward interest rates in financial markets, and, second, the pattern of external imbalances. These features are interesting, in part, because they seem somewhat anomalous, or inconsistent with what the past has led us to expect. They seem likely to be related to each other and both are a feature of the changes underway in global financial integration.
The costs the retail trade has to bear in connection with payments are instead transferred to the consumers by means of general  5  Bergman, M., Guibourg, G., Segendorf, B., (2007), “The Cost of Paying – Private and Social Cost of Cash and Card Payments”. Sveriges Riksbank Working Paper Series No. 212. BIS Review 7/2010  3  price increases on goods. If the customers were also asked to pay the costs of the payment itself when they pay for the goods they have bought, they would probably choose to pay more by debit card and less in cash or by credit card. Previous experience in both Sweden and Norway shows that the choice of means of payment is price-sensitive. In Norway, electronic payments, including card payments, increased very quickly after the banks introduced charges better reflecting the actual cost of the various means of payment. Among other charges, there exists in Norway a small charge for cash withdrawals from ATMs. In Sweden, we virtually stopped using cheques when the banks began to charge for them. These two examples show that consumers’ choices between the various means of payment change significantly when they become aware of the costs. 6 In the autumn survey, we asked the interviewees how they would react to a charge being levied in connection with purchases using cards or cash. Their responses revealed that there is certain degree of tolerance for those retailers charging for card payments.

Despite the fact that the card industry has developed new, secure ways of making card payments over the web, the survey we have conducted shows that the majority of people still reveal sensitive card information in connection with purchases. According to the survey, only 18 per cent of web purchases were made using the safe solutions for card payments that are available. In as many as 71 per cent of the transactions over the Internet, the customers revealed their card numbers without using any additional safety measures. This is a major source of the card fraud that occurs over the Internet. The Ministry of Justice is currently considering a new proposal on the regulation of unauthorised transactions. This aims to clarify how responsibility for a loss should be divided between the customer and the bank in the event of fraud. New limits for the customers’ deductibles and right to compensation are also proposed. In order to determine how large a part of the loss the customer should be responsible for, it will be necessary to assess how negligent the customer has been. The customers must therefore be informed of the definitions of the different degrees of negligence. If the customers are unclear about the  6  4  Speech by Lars Nyberg (2008): “Paying is expensive – are we using too much cash?”. BIS Review 7/2010  rights and obligations they have, this will probably lead to fewer of them wanting to use cards in the future. The new regulation will increase the cardholders’ responsibility.
Improvements to risk management and to capital cushions are likely to have made the financial system more stable and more resilient. And macroeconomic policy has improved around the world. The increase in monetary policy credibility in a broad range of countries has produced lower rates of inflation and more stability in inflation expectations. Greater public confidence in monetary policy was critical to laying the foundation for the improvements in real economic performance, by providing a stable foundation for long-term investment decisions. In emerging markets, better monetary policy has been accompanied by more disciplined and conservative fiscal policy and a range of other policies that have reduced, though not eliminated, vulnerability to changes in confidence, capital flows and exchange rate movements. These factors are each fundamentally important, and they are, of course, interrelated. The policies that delivered better inflation outcomes, more openness and competition and stronger financial systems were critical to fostering an environment in which improvements in productivity and growth could occur. This expansion has also been notable for the financial conditions that have prevailed over the past several years. Long-term interest rates have remained relatively low in nominal and real terms. Equity and other asset prices have moved higher. Credit spreads have declined to quite low levels. Market participants report exceptionally high levels of liquidity. And volatility, both realized and expected, has remained low across many different types of financial assets, market and economies.

It was only founded a year ago and we believe it will continue to develop and be fully fledged as a legacy of our national memory. In mid 1800s, announcing the competition on American banknote, the US Secretary of the Treasury, specified two obligatory requirements to participants about the design: it had to be original, and unpublished previously, and have a national character. Since at the beginning, the banknote is thought as not only a means of exchange, but also as an education tool for the public. As such, it should bear important moments of the history. The banknote performs this function through complicated techniques of subtly fine lines, to prevent reproduction, attributable also to robust security features. Although we frequently have these valuable papers on our hands, seldom do we concentrate for a few minutes and enjoy the art embedded in them. We very rarely focus on examining how the work of a talented painter is intertwined in a sort of a miniature canvas with that of a talented engraver, turning that piece of paper into an elegant expression of creative art. The image is familiar, but it is hard to believe that 14% of interviewers in advanced countries are able to remember recognise the picture designed on each banknote. Even less people may recognise the portrait depicted on 1000 Leke or 2000 Leke Albanian banknotes.
The variety and volume of capital flows are made even more potent by the Velocity with which capital moves around the world. The advance of telecommunications and information technology now means that distance and national boundaries are no longer important restraints. Two consequences follow from this. First, huge amounts of money can be moved into an economy in a very short space of time, and can be moved out just as quickly. In 1996,  BIS Review 35/1999  2  for example, capital was flowing into the emerging economies of Asia at the rate of about $ billion. By the second half of 1997 it was flowing out of the region at about half that speed. Secondly, with the negation of distance and boundaries, events in one particular market can have immediate, dramatic, but often quite unpredicted effects on other markets on the other side of the world. Last year, for example, the debt default in Russia affected mortgagebacked securities as far away as the US and Brazil. Earlier this year, the devaluation of the Brazilian real raised expectations – unfounded, as it turned out – that the ripples from that crisis would destabilise the renminbi. 9. During periods of instability or uncertainty, the volume, variety and velocity of international capital flows can, in an increasingly liberalised and globalised financial environment, often add up to the fifth ‘V’: Volatility. Indeed, the behaviour patterns of capital flows can magnify minor local uncertainties into extensive, prolonged and highly destabilising crises.

Naturally, opinion differs on the appropriate monetary stance at any given time, as uncertainty is a permanent feature of economic life – not only uncertainty about the future, but also about the present and the recent past. 6  BIS central bankers’ speeches
I shall confine myself largely to what is happening in Europe. The increasing globalisation of financial markets is one pressure for change across the world. But in western Europe, the Maastricht Treaty and the preparations for Economic and Monetary Union are requiring central banks to review their statutes and to align their operating procedures. But I also want to talk about the central banks of Eastern Europe. They are feeling similar pressures several hope that their countries will accede to the European Union within five years or so - but their origins are very different. In 1989 most of the state banks of central and eastern Europe had little understanding of the rôle of a central bank in a market economy. Since then they have had rapidly to acquire the knowledge and skills needed to tackle acute inflationary pressures while many of their leading banks were effectively bankrupt. At the Bank of England, we have been actively involved in helping them by drawing on our own experience as central bankers, adapting the lessons we have ourselves learned over the years to the unique circumstances of the transition economies. Much of this effort has been channelled through our Centre for Central Banking Studies which we established in 1990 to provide technical assistance and training to other central banks.

By contrast, the emerging economies presented a mixed picture. Some countries registered a decline in growth, and uncertainty regarding economic developments in China has increased. Consequently, growth was not broad-based internationally, which was also reflected in the lack of momentum in global trade (cf. chart 2). We nevertheless expect the moderate pace of global economic recovery to continue. Expansionary monetary policy and low commodity prices are supporting economic activity in the advanced economies. This is a positive development for the outlook in Switzerland. If global economic growth continues at the same moderate pace, this will help mitigate the negative effects of the strong Swiss franc. Export activity should thus become a growth driver again. Domestic demand will also support the economy. For these reasons, we anticipate that economic conditions will improve somewhat in the second half of the year. However, uncertainty remains high. For 2015 we expect real gross domestic product (GDP) to grow by just under 1%. The difference is in the differential Let us now turn to the interest rate environment. Did our decision of 15 January cause a fundamental shift in parameters in this area? No. I am, of course, aware that, since the introduction of negative interest on banks’ and other financial market participants’ sight deposits at the SNB, many money and capital market interest rates start with a minus sign rather than a plus. For instance, yields on Confederation bonds with terms of up to ten years are currently negative. So, mathematically speaking, the parameters have indeed shifted.