samchain/econo-pairs-v1 huggingface dataset:
As I said, the world will not come to an end in two years’ time. The fact that we do not have any definite answers regarding the effects of a rapid credit boom in my opinion should not prevent us from acting in a manner that will at least not aggravate the risks. Summary Let me conclude by summarising my main message here this evening. 6  •  There has been a gradual development in our reasoning on monetary policy. Compared with the clarification on the Riksbank’s monetary policy strategy published in 1999, we can now go slightly further with regard to how we communicate the considerations of the real economy taken when conducting monetary policy. •  When we make decisions on the repo rate we also try – given our overall objective to maintain price stability – to subdue fluctuations in the real economy. •  This is done by not aiming to bring inflation back on target as quickly as possible in every single situation. When there is a deviation from target, our ambition is normally to return inflation to target within a time period of two years. •  We no longer apply the simple policy rule that relied on forecasts based on a constant repo rate. This rule, among other things, contributed to excessive focus on the two-year horizon in relation to the development of inflation over time.

As I have already noted, the fact that the Riksbank should take into consideration how economic activity develops receives support in the preliminary work to the new Sveriges Riksbank Act. 2  See the memorandum “The Riksbank’s inflation target – clarification and evaluation”, 4 February 1999, registration number 1999-00351 DIR, or Heikensten, L. (1999), “The Riksbank’s inflation target – clarification and evaluation”, Sveriges Riksbank Quarterly Review, 1999:1. BIS Review 29/2006  3  Communication regarding monetary policy As monetary policy is to a large degree concerned with making decisions under uncertainty, it is important that we are always as open and clear as possible regarding the basis for interest rate decisions. The intentions behind monetary policy must be understood and accepted in order to preserve the legitimacy of our activities and our actions. A well-balanced application of the inflationtargeting policy makes it particularly important to clearly explain the motives behind monetary policy decisions. There should be no grounds for suspicion that the considerations taken are used in an arbitrary manner. The Riksbank communicates its monetary policy in a number of different ways, including press releases and minutes of monetary policy meetings, press conferences and not least our Inflation Reports. The Inflation Reports contain our analyses of the deviations from the inflation target that have occurred, and forecasts for when inflation is expected to be back on target, given a particular monetary policy stance.
A second firewall is related to public institutions such as the Superintendences and the Central Bank, which have complementary roles in the monitoring, supervision and regulation of the financial system. The continual improvement of regulations and laws, as well as the search for best practices at the global level is one objective that must always be present in our actions. Within this monitoring role, our Financial Stability Report plays a key role. In it we identify developments which, if intensified, might create risks, or where we believe there is room to reduce residual risks. I would like now to describe some of these developments as well as the main regulatory amendments that have been implemented during the last six months. In our Financial Stability Reports a couple of issues ago we warned about some developments in the real estate sector which, if intensified, could become a source of risk. We were particularly concerned about the combination of dynamic prices with a credit acceleration originating in this sector. In this context, one good element is that mortgage credit growth has remained stable, with no relaxation of lending standards for mortgage loans or credit to construction and real estate firms. However, housing price indexes are as dynamic as in previous periods, in a scenario of high demand and low inventories. Meanwhile, the expected supply of office space continues to rise and is in historically high levels.

If a non-European country wanted to help Europe, there is the question of whether it should send the money to the IMF or use it to purchase EFSF bonds, a senior tranche of the SPV, or the peripheral countries’ debt, i.e. with no intermediation. The many uncertainties associated with the specific operation of the EFSF are giving rise to general doubts about the appropriateness of the current approaches to overcoming the ongoing debt crisis in the euro area. I cannot help feeling that many solutions to the problems have been wrongly chosen in part because the main causes of the financial and debt crisis have not been correctly identified. Greece gets too much attention from decision- and policy-makers. It represents a mere 1/50 of the European economy. I believe that without the political will to provide Greece with massive support from European funds to restore its competitiveness – and I see little such will at the moment – its exit from the euro area will be inevitable, since depreciation of the Greek currency will become part of the measures to restore competitiveness. The provision of loans to Greece has so far primarily bought time. This has enabled wealthier Greeks to transfer their savings out of the country. The costs of such action have been a reduction in Europe’s credibility and harm to the reputation of the International Monetary Fund and its ability to raise funds outside Europe.
In recent years, our exports have benefited from growth in emerging Asia and our terms of trade, despite a recent drop, are still high by historic standards. The terms of our access to international credit are still privileged. And we have the resources we need to deal with potential emergencies. Our macroeconomic policy framework, which comprises a monetary policy governed by an inflation target, a floating exchange rate and the fiscal rule, has been determinant in this result, as has been the regulation and supervision framework of our financial system. Despite this favorable internal scenario, the evolution of the developed world’s economic outlook has made us again uncertain about how the global economic situation will unfold and how it will affect our country. The lateness and lack of resolution of fiscal and financial problems in the Eurozone have constrained global financial conditions, deteriorated the growth prospects of the world in general and our trading partners in particular, and reduced our terms of trade. All these factors combined have an effect on Chile’s economic growth, whose magnitude is yet to be seen. The baseline scenario of the Monetary Policy Report assumes a limited impact, but there are important risks. The Great Recession of developed economies in 2008–2009 is not totally over. Solving the macroeconomic and financial imbalances where the crisis originated will take a long time, and its effects will remain visible in the world economy.

Figure 6 Inflation indicators  Incidences on monthly inflation (*)  (annual change, percent)  (percentage points)  12  12  0.8  0.8  10  10  8  8  0.6  0.6  6  6  0.4  0.4  4  4  0.2  0.2  2  2  0.0  0.0  0  0  -0.2  -0.2  -2  -2  -0.4  -0.4  -4  -4 06 07 CPI  08  09  10  11  CPI minus foodstuffs and energy  11  Apr. Jul. Oct.  Fresh fruits & vegetables (2.90%) Fuels (5.70%) Foodstuffs X1 (17.77%)  CPI  Meats (3.55%)  (*) In parentheses, shares in CPI basket. Sources: Central Bank of Chile and National Statistics Institute (INE).
Lars E O Svensson: Monetary policy and employment – monetary policy is too tight Speech by Prof Lars E O Svensson, Deputy Governor of the Sveriges Riksbank, to the Swedish Trade Union Confederation, LO, Stockholm, 16 January 2013. *  *  *  I would like to thank Karolina Ekholm, Gabriela Guibourg, Kerstin Hallsten, Per Jansson, Kerstin af Jochnick, Pernilla Johansson, Ulf Söderström, Staffan Viotti and Anders Vredin for useful comments and discussions. Anna Lidberg and Marianne Sterner have contributed to this speech. The views expressed here are my own and are not necessarily shared by the other members of the Executive Board of the Riksbank or by the Riksbank’s staff. Monetary policy is too tight in Sweden Although I am myself a member of the Executive Board of the Riksbank, it is hardly a secret that I see major problems with Swedish monetary policy. In a shorter-run perspective one can note that both CPI and CPIF inflation are now significantly below the inflation target of 2 per cent, and that unemployment is way above a reasonable long-run sustainable rate. There is no doubt that monetary policy has contributed to this, in that it has been too tight since the Riksbank began raising the policy rate in the summer of 2010. This may of course sound strange given that the policy rate is at a historically low level.

…and gives vulnerable groups of unemployed a better chance of getting jobs It is also often said that more of those in vulnerable groups with a high rate of unemployment, such as young people and people born abroad, have entered the labour market and that this, rather than the business cycle, explains why unemployment has increased.18 However, it is the vulnerable groups that are most sensitive to economic fluctuations. They are the first to be given notice of redundancy if they have a job, and they are the last to be offered a job if they are unemployed. They are thus more vulnerable to fluctuations in the demand for labour and if they are to get jobs and work experience if they are unemployed, we need to have a very large demand for labour and thus very expansionary monetary policy. As a large share of the labour force now has job chances that are sensitive to demand, one could claim that employment as a whole has now become more sensitive to demand fluctuations. Increased demand could then have greater effect on employment and unemployment than it did before. The fact that more people in vulnerable groups have now entered the labour market is thus an argument in favour of a more, not a less, expansionary monetary policy. High unemployment over a long time requires more expansionary monetary policy to bring down unemployment The fact that unemployment has been high over a long period of time has meant that longterm unemployment has increased.
In order to reduce the attractiveness of the Swiss franc relative to other currencies, in January 2015 the SNB lowered its target range for three-month Libor into thenunprecedented negative territory (between −0.25% and −1.25%) and simultaneously imposed a negative interest rate of −0.75% on the sight deposits which banks hold at the SNB. 2 This negative rate helps to maintain – at least in part – the interest rate differential between the Swiss franc and other currencies. This, in turn, reduces the franc’s attractiveness and helps alleviate appreciation pressures. In the first quarter of this year, long-term bond yields fell globally due to the coronavirus crisis, and the Swiss franc interest rate differential versus other currencies once again narrowed significantly. At the same time, the Swiss franc retained its traditional role as a safe haven in uncertain times, and it duly appreciated after the outbreak of the crisis. At times, we had to increase our foreign exchange purchases to reduce appreciation pressures. Our combination of monetary policy instruments – negative interest on sight deposits and foreign exchange market interventions – thus remains as necessary as ever in this period of heightened uncertainty. We would now like to show you in more detail how the SNB goes about steering negative interest rates on the money market. 2  On 18 December 2014, in a move aimed at supporting the then still prevailing minimum exchange rate relative to the euro, the SNB announced that it would, as of 22 January 2015, charge an interest rate of −0.25%, i.e.

Wellfunctioning money markets provide the basis for determining reference rates, which perform a key informational function for the economy as whole. The pricing of a broad array of financial products – particularly in the capital and derivatives markets – is based on reference rates. They are also used in credit and mortgage transactions and many other types of contracts. Reference rates can only be credible and robust in the long run if the underlying market functions well. The crucial importance of sound reference rates for an orderly functioning of financial markets cannot be over-stated. We now turn to a discussion of some of the changes in the landscape of reference rates in Switzerland. The role of SARON – the reference rate for Swiss franc financial markets The Global Financial Crisis greatly accelerated the shift in the interbank money market from the unsecured segment to the repo market. As unsecured activity dwindled, the Swiss franc Libor, for decades the benchmark for Swiss financial markets, lost reliability and robustness. The alternative to Libor is SARON. Today, SARON is the most representative interest rate on the Swiss franc money market. SARON is a secured overnight rate and reflects conditions in the most liquid segment of the Swiss franc money market. Unlike the Libor fixing rate, it is  Page 4/13  calculated on the basis of actual transactions and binding quotes. Approximately 150 financial institutions have direct access to this market. SARON has existed since 2009 and its economic importance has grown significantly in recent years.
As a result, one of the most salient features of the Swiss economy is the strength of its finance industry. Despite its very small size, Switzerland stands as the eighth largest securities market in the world. The total value of its quoted stocks and bonds amounts to four times its annual GDP, a world record. Swiss banks manage about one third of total offshore assets worldwide, and our insurance and re-insurance companies have reached global dimensions. What are the keys to financial stability? For sure, financial stability is the result of many elements: the importance of domestic savings, the stability of the institutional framework, the strength of our banking system and - last but not least - the deeply rooted conviction of the general public that monetary stability is important and should be preserved. Monetary stability: a well-accepted objective Indeed, there can be no financial stability without monetary stability. History has taught us many times that policy instability almost invariably leads to financial chaos and, very often, to political unrest. But the issue is not avoiding hyperinflation only. I suppose that everybody in this room would agree that hyperinflation must be eliminated by all means. Sooner or later, it leads to the total disorganization of a market economy. But even on a lower level, inflation interferes with growth and reduces welfare. In Switzerland, too, some are of the opinion that “a little dose of inflation” is beneficial to growth and employment. I entirely disagree with this view.

The bank-business relationship institutionalisation might assist in resolving a number of issues, which may be challenging to be addressed individually by banks or businesses, be they large ones. The best example is the effort of reducing the informal economy. All present parties in this meeting have expressed their pros to the fight against evasion and informality. In reality, however, the dishonest competition forces many of them to choose the informal means, since, contrary, they will find themselves out of the market. The breaking of this vicious circle could be made possible by a better coordination of our efforts, in order to avoid the so-called free-rider phenomenon, where the dishonest business is given too much room to take advantage of the situation. Hence, I welcome today’s meeting, hoping that it shall not simply remain within the communication context, but rise in a higher level of coordination. 1/1
In the next slide, the payments ecosystem in our two-tier financial system is presented in a simplified form. On the first level, via the RTGS (blue field), the central bank enables financial institutions to settle payments using secure systems and electronic central bank money. On the second level (green field), the financial institutions enable retail payments. When it comes to integrating new players, there are currently two models: first, indirect access via the banks. This ‘open access’ approach, shown on the left-hand side of the slide under ‘Model 1’ (client –> fintech –> bank), is the one adopted by the EU. The new Payment Services Directive (PSD2) requires EU banks to grant fintechs access to bank accounts. The second option involves granting fintechs direct access to core payment systems. This ‘direct access’ approach is shown on the right-hand side of the slide under ‘Model 2’ (fintech –> RTGS). Switzerland has chosen this approach. As the SNB announced at the beginning of this year, it will grant fintech companies access to the SIC system and to SNB sight deposit accounts, provided they have a fintech licence and their business model makes them significant participants in the area of payment transactions. The advantage of the direct access model is that it also allows retail payments made using  Page 7/9  payment solutions from new providers to be settled efficiently and securely in central bank money.

This is against the backdrop that Asia experienced an average GDP growth rate of 9.6 percent. This suggests that trickle-down economics has failed to deliver equitable growth. We should expect that if significant segments of the population are systematically excluded from the tools that drive success, there will be economic consequences. Financial access and education are arguably two of the most critical tools that enable individuals to achieve success. Yet, around 50% of the global population live on less than USD2.50 per day, most of them without access to formal financial services. That is almost one in two people who, given the opportunities that come with financial access, could be making much greater contributions to society, and consequently, raising economic potential. We also learnt that, stagnating median wages have discouraged the low and middleincome from saving and investing. Against this backdrop, microfinance has captured the global imagination of policymakers, development institutions, private enterprises and donors alike to promote greater financial inclusion. Yet over the last few decades, since Grameen Bank entered the world’s consciousness, microfinance has had a mixed experience. World views on this subject have also become more polarised. Some consider microfinance to be the panacea (which it is not) to end poverty, others have been highly critical of its abuse to exploit the poor. These characterizations are very diverse but it is useful feedback that we should ponder. These contrasting views illustrate the complexities and challenges associated with the subject. Microfinance, like all public policies, faces the challenge of implementation.
The argument is that the same restraining effect on wage formation could now be achieved if the service sector sets the norm rather than the manufacturing industry. The idea is that if the service sector sets the norm too high, the Riksbank would increase the interest rate and that this would dampen economic activity, employment and inflation in the same way as if the manufacturing industry set the norm too high and lost international competitiveness. The sector exposed to international competition should set the norm My own view is that the sector exposed to international competition still has a central role to play in wage formation. But this sector should not be equated with the manufacturing industry. Other sectors are also exposed to international competition to varying degrees. It is also important that there is consensus between the negotiating organisations on what part of the economy should set the norm. I do not think that there is any major difference between the previous situation with a fixed exchange rate and the present situation with a floating exchange rate. Our inflation target is largely the same as in other countries. As we saw earlier, inflation over the last 15 years has also been more or less the same in Sweden and Germany. The only way that we can have higher wage increases is if the development of productivity in Sweden is higher than in other countries.

Maintaining such a sizeable portfolio will exert lasting downward pressure on term premia. Chart 5: Outstanding quantity of duration: PSPP portfolio and other investors (EUR billions, 10-year equivalents)  6 / 12  BIS central bankers' speeches  Turning to liquidity creation, the roll-over of the portfolio resulting from our reinvestment policy will also continue to preserve abundant liquidity over the coming years. In the absence of reinvestments, and assuming that targeted longer-term refinancing operations (TLTROs) are repaid at maturity, the level of excess liquidity would decline significantly over the coming years (Chart 6). Chart 6: Evolution of excess liquidity under no re-investment counterfactual hypothesis 7 / 12  BIS central bankers' speeches  (EUR billions)  Our reinvestment policy will contribute to maintaining favourable liquidity conditions for an extended period of time, which helps anchor expectations regarding the evolution of very shortterm interest rates at the deposit facility rate. Ample volumes of excess reserves ensure that the overnight interest rate stays close to the floor of the interest rate corridor, which is provided by the deposit facility rate. This, together with forward guidance on the expected evolution of our policy interest rates, reduces rate uncertainty across maturities and thus adds to the 8 / 12  BIS central bankers' speeches  compression of term premia brought about by the duration extraction channel. Of course, our portfolio – even if kept constant – will tend to lose duration over time, as the securities held gradually mature.