samchain/econo-pairs-v1 huggingface dataset:
Are there any other objectives than price stability and financial stability that may be suitable for a modern central bank? Many countries also have objectives for developments in the real economy written into the regulatory framework governing the central bank’s activities. For instance, in the US legislation it says that the Federal Reserve shall promote “maximum employment”, while the British legislation says that the Bank of England shall support “the economic policy of Her Majesty’s Government, including its objectives for growth and employment”. In Sweden there is no specific objective for real economic developments written into the law, but it is nevertheless considered to be understood that the  4  See, for instance, Oosterloo, S. and J. de Haan, (2003), ”A Survey of Institutional Frameworks for Financial Stability”, Occasional Studies Vol.I/No. 4, De Nederlandsche Bank, for an overview of how the task of promoting financial stability is dealt with in different central banks’ regulations and in practice. 4  BIS Review 21/2006  Riksbank – as an authority under the Riksdag, the Swedish parliament – shall support the objectives of economic policy with the aim of attaining sustainable growth and a high level of employment. Exactly how the objectives are worded thus varies considerably between countries, often depending on the fact that changes and modifications have gradually been made to regulations originally written much earlier. I dare to claim nevertheless that the essence of modern central banks’ wording of their objectives is the same.

BIS Review 21/2006  5  optimism regarding the role monetary policy can play in long-term real economic growth was one important reason why inflation was so high during the 1970s. The value of independence How can one then construct a framework for monetary policy that provides the central bank with the best possible conditions to carry out its tasks? Here I intend to be fairly brief as this is something that will be discussed in more detail in the next contribution to this conference. Let me just note that there is currently general agreement that the central bank should be given the opportunity to work independent of the political system in order to attain the objective of price stability. It has been observed that if monetary policy is conducted at arm’s length from party politics, there is greater confidence in the price stability objective. This is linked to the fact that there has often been a tendency for politicians to use monetary policy for more short-term purposes which have conflicted with the long-term price stability objective and which have often entailed loosening the nominal anchor. Making the central bank independent is probably the element of the past decades’ monetary reform process that has triggered the most debate and has been perceived as the most controversial. It is probably natural for politicians to feel uncomfortable giving the central bank increased independence as it unavoidably means that they give up some of their decision-making powers, and moreover in a field perceived to be central.
Page 3/8  Zurich, 22 June 2023 Thomas Jordan, Martin Schlegel and Andréa M. Maechler  News conference  The renewed increase in our policy rate is therefore necessary to bring inflation back to the range consistent with price stability on a sustainable basis over the medium term. We cannot at this stage rule out the necessity of further monetary policy tightening to achieve this objective. It is also important in this regard that the ample liquidity assistance we provided to Credit Suisse in March does not influence our monetary policy stance. My colleague Andréa Maechler will address this specifically when she sets out how we implemented our monetary policy over the past quarter. Allow me to return briefly to the subject of rents. Policy rate increases lead to a rise in mortgage rates and thus also in the reference interest rate for rents. This makes it possible for some rents to be increased, which can in turn temporarily result in higher overall inflation. However, this feedback effect must not be taken as a reason for refraining from necessary policy rate increases. For without a more restrictive monetary policy, there would be a danger of inflation becoming entrenched and much stronger rate increases being required in the future. Today’s further tightening of our monetary policy is therefore also appropriate from this perspective. Ladies and gentlemen, I now hand over to Martin Schlegel. The SNB published its latest Financial Stability Report this morning. I would like to present the main points to you now.

The Principles for Financial Market Infrastructures (FMI) say that “An FMI should identify, monitor, and manage the material risks to the FMI arising from tiered participation arrangements.”[13] That means understanding what is going on with clients. Communication between exchanges and CCPs; and better sight of OTC markets by exchanges and CCPs will be important here. A Path Forward Thriving, well-regulated, international CCPs, like the members of EACH, continue to be a crucial part of our efforts to enhance financial stability and build resilience. As we learn the lessons from recent volatility episodes we should look to how CCPs can continue to be part of the solution by learning and adapting. This will require cooperation across borders. For the financial system to reap the full benefits of central clearing, we need CCPs that can provide a seamless network of functions across borders. We need to ensure that CCPs can continue to operate cross-border with appropriate supervision and regulation that gives both home and host regulators confidence. The alternative risks fragmenting the clearing market in ways that will make it less robust, and potentially imperil the success we’ve seen over the past 14 years. Building on the extensive and successful cooperation that already takes place, the Bank of England has outlined an approach to regulating cross-border CCPs based on informed reliance and proportionality. [14] Large international CCPs that are well-regulated and supervised by authorities with whom we have a deep cooperative relationship can continue to serve UK clearing members and clients.
Third, the statement gives an indication of how the MPC intends to respond to future data developments. In line with the argumentation that I have already offered, it emphasises that the MPC will be focused on ‘indications of more persistent inflationary pressures’ – in my view, this places emphasis on identifying potential second-round effects in price and wage setting behaviour. This helps to clarify how the MPC defines it policy ‘reaction function’ at present, prioritising the more persistent component of inflation developments over the headline spot measure. Fourth, by signalling preparedness to ‘if necessary act forcefully in response’ to indications of  Page 11  greater persistence in inflation, the statement reflects both my willingness to adopt a faster pace of tightening than implemented thus far in this tightening cycle, while simultaneously emphasising the conditionality of any such change in pace on the flow of new data and analysis. Much remains to be resolved before we vote on our August policy decision. How I vote on that occasion will be determined by the data that we see and my interpretation of it. And finally, harking back to the opening section of my remarks, the statement places a direct and clear statement of the MPC’s commitment to return inflation to target at its heart. This is something all MPC members agree on – and the main message addressees of the statement should extract. As I said earlier, it is also the message I would like you to take from my comments today.

Policy actions may turn out to be ill-timed or miscalibrated in the face of these uncertainties. There is thus an inevitable short-term volatility in UK inflation, which monetary policy makers have  Page 6  to live with. And when the shocks driving that short-term volatility are large, then the amplitude of this short-term volatility in inflation can be large. This story remains an important part of what the UK has experienced of late. Recognising the impossibility of fine tuning inflation developments on a month-to-month basis, the MPC has long emphasised its focus on achieving the inflation target over the medium term. This medium-term orientation of monetary policy is crucial if the inflation target is to be met in a sustainable manner and monetary policy is not to become a source of inflation volatility itself. At present, the desirability of adopting this medium-term orientation is bolstered by the nature of the underlying drivers of UK inflation. The large rises in the prices of international goods and energy not only directly raise UK inflation, but will also weigh on domestic incomes and demand through the terms of trade channel. [10] As a result, in taking monetary policy decisions today, the MPC needs to take account not just of the immediate inflationary impact of higher energy prices in the coming months, but also the potential disinflationary impact of higher energy prices through weaker incomes and demand at longer horizons. This distinguishes the situation we face from that in other jurisdictions – notably from the US.
Given the depth of the recession, there is likely to be a greater than usual degree of history-dependence, or hysteresis, in this path. The deeper and longer the recession, the greater the scarring effects on physical and human capital and hence the economy’s productive potential. The May MPR scenario captured some of these scarring effects. In particular, it assumed that lower investment as a result of the Covid crisis was not recovered, leaving the capital stock 4% lower. Combined with some drag on total factor productivity (TFP) growth, the level of output ended 1½% lower. That scenario assumed no scarring effect on human capital, however, with unemployment returning to pre-Covid levels and the long-run rate of unemployment unchanged at around 4¼%. At the same time, it was recognised that this was just one of many possible paths for the economy. Other paths would give rise to differing degrees of scarring to physical and human capital and losses to the long-run productive potential of the economy. On 14 July, the Office of Budget Responsibility (OBR) will publish three possible scenarios for the economy involving different degrees of depth and length of the downturn. Perhaps the key uncertainty, from a scarring perspective, concerns the labour market. As Chart 2 illustrates, the Covid crisis has had markedly different effects on different sectors and, most likely, will continue to do so. Chart 14 compares different sectors’ contribution to the pre-Covid employment boom and its subsequent output contraction.

Globally, fast indicators point towards the trough in activity in the UK’s main trading partners having come during, or just after the end of, the first three months of the year: in China in February and in the US and euro area in early April. That means UK-weighted global GDP has perhaps been recovering for around three months. Chart 5 plots PMIs for a range of the UK’s major trading partners. Although the PMIs are a less  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  good guide than usual to GDP outturns, they have bounced back sharply, as have some other business surveys.9  Chart 5: PMIs in selected countries  Index, 50 = no change 70 France  Germany  US 60 50  Euro area  40 China 30 20 10 0  2006  2009  2012  2015  2018  Sources: Thomson Reuters Datastream. Notes: Composite output PMIs. Solid red line shows ISM PMIs for US, dashed red line shows Markit PMIs. Chart 6a plots the Google-based proxy for social spending in a range of countries since the start of the year, most likely the slowest of the consumption categories to recover. This measure troughed in Q1 for most countries and has since recovered across the board, albeit to different degrees. For some countries, it is already close to pre-Covid levels. The country divergence is even larger in Chart 6b, showing restaurant bookings across countries, but the extent of the recovery is nonetheless similar.
Chart 15 is a point-in21  All speeches are available online at www.bankofengland.co.uk/news/speeches  21  Chart 13: The FPC’s housing tools prevent an  Chart 14: FPC housing tools have positive net  increase in highly indebted households  benefits Per cent of GDP  Benefits Costs Net Impact  3 2 1 0 -1  Central  Upside  Boom  Source: Bank calculations. For more information please see the Bank’s Financial Stability Report, December 2019. It is often the case that more than one policy tool could be used to reduce GDP-at-risk, but these tools tend to be blunt. More targeted policies will usually have less impact on the FPC’s secondary objective, and so will yield better overall outcomes. The grey triangles in Chart 15 estimate GDP-at-risk (proxied by the 5th percentile of the forecast distribution of GDP) in 3 years’ time, conditional on risks at time t on the x-axis, versus on the y-axis the Bank of England’s 1-year ahead median GDP forecast at time t. It estimates that if in 2004 the FPC had their housing tools in place, GDP-at-risk (x-axis, proxied by the level of GDP expected in 2007, at the 5th percentile of the forecast distribution of GDP) could have shrunk by more than one third, from -3.3% of GDP to -2.1% of GDP. The cost of this (y-axis) would have been around 0.1% of GDP per year.

Chart 19: Outflows from open-ended funds more  Chart 20: Outflows from open-ended funds  sensitive for greater holdings of illiquid assets  more sensitive when market  Expected Fund Flows % 0 -0.2 -0.4 -0.6 -0.8 -1 -1.2 AE Equity  EME AE Gov AE Corp CRE Equity Bond Bond Funds  Source: Morningstar and Bank calculations. EME Bond Source: Financial Conduct Authority, Morningstar and Bank calculations. For more information please see the Bank’s Financial Stability Report, December 2019. 32 Illiquid assets are those that require a material price discount for a quick sale, or equivalently those that require a  significant period for sales to avoid a material price discount. For discussion, see the chapter on “Vulnerabilities in openended funds” in the Bank of England’s December 2019 Financial Stability Report. 28  All speeches are available online at www.bankofengland.co.uk/news/speeches  28  Last year, the FPC established that in order to reduce the first-mover advantage, greater consistency was needed between the liquidity of a fund’s assets and its redemption terms. To achieve this, funds should apply a pricing tool, a notice period or a combination of both that reflects the liquidity of their underlying assets (Charts 22 and 23), given by the following definitions:   Liquidity measurement: The liquidity of funds’ assets should be assessed either as the price discount needed for a quick sale of a vertical slice of those assets or the time period needed for a sale to avoid a material price discount.
It should be remembered that one of the main reasons for the simplification of central bank targets in recent years, and for assigning them the main objective of price stability, is that inflation is primarily a monetary phenomenon and the long-term impact of monetary policy is above all on prices. Its impact on economic growth and employment is therefore generally only temporary. Since central banks broadly speaking have only one instrument, i.e. interest rates, and can therefore only achieve a single long-term macroeconomic goal, it is natural to set price stability as the ultimate monetary goal. This is not to say that price stability is a more important goal than, say, full employment, but simply that monetary policy instruments are inherently better suited to impacting prices. It is pointless to set objectives for monetary policy which it cannot achieve. Through price stability, a forward-orientated monetary policy can contribute towards creating a stable economic environment on which the long-term growth potential of the economy is based. From the above it is clear that the Central Bank’s main task is to achieve the inflation target, and this is what it aims to do. There have been vocal calls recently for the Central Bank to ease its monetary stance in order to soften or even prevent a looming economic contraction. The growth outlook has an impact on the output gap, i.e. the deviation in demand from a level which is consistent with balanced supply and demand for domestic goods and factors of production.

At the same time the Bank would be obliged to submit a report to the Government, which would be made public, stating the reason for the deviation, its planned response and the length of time that it expected to take to bring inflation back within target. When the target was set, inflation was running relatively high in Iceland. Bearing that in mind, the upper tolerance limit was set for 6% this year, 4½% in 2002 and then 4% from the year 2003 onwards. Upheavals in the foreign exchange market in the spring and a sharp depreciation of the króna caused a substantial rise in inflation, which exceeded the upper tolerance limit in June. The Central Bank submitted a detailed report to the Government on June 20. Other aspects of the joint declaration included a provision that, notwithstanding the abolition of the exchange rate target band, the Central Bank would intervene in the interbank market in foreign exchange by buying and selling currency if it deemed this necessary in order to contribute towards attaining the inflation target, or if it viewed exchange rate swings as a threat to financial stability. At the same time, the Central Bank undertook to produce a quarterly inflation forecast projecting two years into the future.
Edmond Lau: LIBOR transition and sustainable finance Keynote address by Mr Edmond Lau, Senior Executive Director of the Hong Kong Monetary Authority, at the 2021 International Swaps and Derivatives Association (ISDA) Asia-Pacific Conference, 19 October 2021. * * *  Opening 1. Good morning. I’m very glad to join you virtually today at this ISDA conference. The ISDA Asia-Pacific Conference has always served as an important forum, bringing together participants across the capital and derivatives markets to discuss key global issues with an Asia-Pacific focus, while at the same time contributing ideas and thoughts on areas where we share common interests. 2. In today’s conference, I would like to share my views on two hot topics: (1) LIBOR transition; and (2) sustainable finance. The development of these two subjects would bring changes to our financial landscapes and business practices, requiring our prompt action and swift transition. LIBOR Transition 3. First, let me begin by making a few remarks on LIBOR transition. Now, with less than 3 months to count down to end-2021, LIBOR cessation will soon turn into reality. At this critical point in time, it is important for us to further our efforts, and forge ahead with all the preparatory work necessary to get ourselves ready for this transition. International and Regional Coordination 4. Given the dynamic and evolving nature of this subject, it is also important for us to keep a close watch on ongoing developments, and play an active part in various international fora.

Second: It is important for the growth potential in the economy that we maintain a broad sector in the mainland economy that works under intense competition so that we maintain and strengthen the incentive to acquire knowledge and to be innovative. Third: It is important that we bear in mind the issue of distribution across generations and that we manage the wealth as an asset. BIS Review 13/2003  5  1. From petroleum to financial wealth Per cent of total wealth  8  Petroleum wealth  7  Financial wealth  6 5 4 3 2 1 0 1999  2030  Source: Long-term programme 2002-2005  2. A Demographic Challenge 1000 persons 3000  Ratio 4 Number of persons in labour force (left-hand axis)  2500  3 labour force / pensioners (left-hand axis)  2000 1500  2  1000 1 500  Number of pensioners (left-hand axis)  0 1970  0 1980  1990  2000  2010  2020  2030  2040  2050  Source: National Budget 2003  6  BIS Review 13/2003  3.
In this respect, there is still a need to better coordinate the roles of the different European authorities – SSM and ECB, SRM, Commission, and EBA – in order to 3/5  BIS central bankers' speeches  have a clearer “pilot in the plane” in crisis management. At a later stage, we should even consider establishing a single banking authority for our single Banking Union, acting to bolster the robustness of the European banking sector. The second challenge is to support cross-border bank consolidations in the euro area. You, the “foreign” bankers in the Netherlands, are probably especially sensitive to that. The head of the SSM too, Danièle Nouy, insisted on this point last week. We still lag far behind the American market in this respect: the market share in the United States of the top five banks is more than 40% whereas the market share in the euro area of the top five banks is less than 20%. Sound and safe cross-border consolidations would make banks better able to diversify their risks across the euro area, and channel savings more effectively towards investments across borders; this would foster the Financing Union I talked about. From a supervisory point of view, it involves supporting an approach on a consolidated basis by granting more waivers on liquidity and capital so as to allow more flexible capital allocation and limit ring-fencing. Swift execution of cross-border transactions is also essential: the implementation of a fast-track process by the SSM would address this issue.

Going forward, I would not be surprised to see Puerto Rico’s exports rise further as your companies take advantage of the opportunities presented by the rapidly emerging economies. At your upcoming forum and summit, you’ll learn more about how to develop export markets for your products. I applaud your efforts to do so, as an important component of sustaining the vigor of the economic recovery in Puerto Rico. The long view and the New York Fed’s role Although the signs I’ve mentioned suggest that the recession is over, the road to sustained economic growth is likely to be challenging in the near term. In its favor, Puerto Rico has some important intrinsic advantages. These include natural beauty, a hospitable climate and unique status as a major U.S. economic and population center in the Caribbean. Perhaps just as important, the island has a relatively well-educated workforce. Research shows quite convincingly that abundant human capital is an important ingredient for a thriving economy. We at the New York Fed aim to do our part to help sustain growth in the Commonwealth. For example, we co-sponsor a financial awareness video competition for college students here and the Community Reinvestment Act Week activities with the Puerto Rico Bankers Association. And, as a member of the Alliance for Economic and Financial Education we promote economic and financial education via teacher training, a high school economic competition, and a speaker series. The New York Fed also has several ongoing programs of technical assistance in Puerto Rico.