samchain/econo-pairs-v1 huggingface dataset:
The firming in economic activity, in short, is due both to natural healing and past and present policy support. 2  BIS central bankers’ speeches  In this regard, it important to emphasize that we did expect growth to strengthen. We provided additional monetary policy stimulus via the asset purchase program in order to help ensure the recovery did regain momentum. A stronger recovery with more rapid progress toward our dual mandate objectives is what we have been seeking. This is welcome and not a reason to reverse course. We also have to be careful not to be overly optimistic about the growth outlook. The coast is not completely clear – the healing process in the aftermath of the crisis takes time and there are still several areas of vulnerability and weakness. In particular, housing activity remains unusually weak and home prices have begun to soften again in many parts of the country (Chart 15 and Chart 16). State and local government finances remain under stress, and this is likely to lead to further fiscal consolidation and job losses in this sector that will offset at least a part of the federal fiscal stimulus (Chart 17). And we cannot rule out the possibility of further shocks from abroad, whether in the form of stress in sovereign debt markets or geopolitical events. Higher oil prices act as a tax on disposable income, and the situation in the Middle East remains uncertain and dynamic.

And the Bank of England is similarly mandated to pursue "price stability as defined by the (symmetrical) inflation target, and without prejudice to that objective to support the Government's economic policy, including its objectives for growth and employment". Now the exact words of these mandates differ - to varying degrees. What's more we all have our own procedures and processes - in terms of the composition of our decision-making bodies for example, or the form and frequency of our policy meetings, or of our arrangements for public accountability. And our approaches to fulfilling our mandates vary from one central bank to another - some of us, for example, have a more precise target, or tolerance range, for inflation, or some provide a more explicit role for monetary aggregates within the analytical framework and so on. And much is sometimes made of these various differences. One can in fact spend many happy hours debating the finer pros and cons of one formulation as against another, and that can be a productive thing to do in pointing up the issues, though I think in the end my own conclusion is that circumstances alter cases - there's no unique best buy. But I think that we need in any event to be careful that in pointing up the differences between us we don't exaggerate them. Because I have to say that in my experience - at a more fundamental level we are all trying to do the same thing.
Before I move on to my personal reflections on the situation in the Swedish economy, I would like to say that I make the same assessment of the economic outlook in Sweden as that made by the majority of the members of the Executive Board at the latest monetary policy meeting. This assessment is that there will be relative low inflationary pressures and slow growth in the period ahead. It was expected that the Swedish economy would slow down at the end of last year, but the slowdown was more severe than we believed it would be. In the December forecast the Riksbank predicted that growth would decline and that there was some probability of a further repo-rate cut in February. In February, our assessment was that the slowdown in growth in late 2011 had been even more severe. This was because the indicators for exports, among other things, suggested this. I therefore voted with the majority to cut the repo rate by a further 0.25 percentage points. Since then, we have learned that the outcome for GDP growth in the last quarter of 2011 was even worse than we expected at the time of the monetary policy meeting in February. This is largely because exports were even weaker than expected. However, we have also received outcomes for foreign trade in January which indicate that exports strengthened again after the turn of the year.

This applies, for example, to the need for consolidation and which strategy is best for finding solutions to the debt crisis in the euro area as quickly as possible. The question of what role the central banks should play in counteracting an excessive expansion of credit and indebtedness is also often debated, and the members of the Executive Board of the Riksbank also have different opinions about this. I don’t find this strange at all, on the contrary it is entirely natural. Hopefully, this debate will contribute to constructive solutions going forward. Thank you. BIS central bankers’ speeches  13
These resources are to be found in the Exchange Fund, the use of which, as you know, is governed by the Exchange Fund Ordinance. Under this Ordinance, the uses to which the Fund may be put are quite specific. Section 3(1) of the Ordinance states that the Fund “shall be used primarily for such purposes as the Financial Secretary thinks fit affecting, either directly or indirectly the exchange value of the currency of Hong Kong and for other purposes incidental thereto”. Section 3(1A) further provides that “the Financial Secretary may, with a view to maintaining Hong Kong as an international financial centre, use the Fund as he thinks fit to maintain the stability and integrity of the monetary and financial systems of Hong Kong”. Under section 5B of the Ordinance, the Financial Secretary has delegated day-to-day decisions on the use of the Exchange Fund under these sections to the Monetary Authority. The clear indication here is that the use of the Exchange Fund must be for systemic purposes. The guiding principle in considering whether to provide lender of last resort support to an individual authorised institution is therefore whether the failure of that institution, either by itself or through spreading contagion to other institutions, would damage the stability of the exchange rate or the monetary and financial systems. It is neither possible nor necessary to give an exhaustive list of all the instances that might be covered by this principle.

Preconditions for Lender of Last Resort Support The basic precondition for lender of last resort support is the systemic risk that would, in the judgement of the HKMA, arise from the failure of a troubled institution if it were deprived of liquidity assistance. This is the basic precondition, but not the only precondition. The institution in question would also need to satisfy a number of further conditions designed to demonstrate that lender of last resort support is genuinely being sought as a last resort, and that such support would not amount to throwing good money after bad. To be specific, the additional preconditions are: •  First, the institution would need to have a sufficient margin of solvency. As a measure of sufficiency, we would generally require the institution to demonstrate that it maintains a capital adequacy ratio of at least 6% after making adjustment for any additional provisions that might be necessary. •  Secondly, the liquidity support extended to the institution would need to be adequately collateralised. •  Thirdly, the institution should have sought other reasonably available sources of funding before seeking lender of last resort assistance. •  Fourthly, the shareholder controllers of the institution should have made all reasonable efforts to provide liquidity or capital support as a demonstration of their own commitment to the institution. •  Fifthly, there must be no prima facie evidence that the management is not fit and proper, or that the liquidity problem is due to fraud.
In practice it is often interpreted as stabilising resource utilisation around its normal level. I think that is a fairly reasonable interpretation and it is not easy to argue for anything entirely different. At the Riksbank we approach the concept of a well-balanced monetary policy by forecasting such things as inflation and resource utilisation for different monetary policy actions. After this we try to select the course of action associated with the best possible forecast outcome; in other words the forecasts where inflation is best stabilised around the inflation target and resource utilisation around a normal level. This may sound simple and obvious but in practice is not that easy. In the first place, the best measure of resource utilisation is far from obvious and we Executive Board members may have slightly different opinions on this. 9 We are constantly working to improve the measures of resource utilisation and this is important. But as I see it  Implications, Wiley 2003. Lars Nyberg discusses the balance sheet channel in more detail in the speech “After the crisis – new thoughts on monetary policy” published on 6 December 2010. 9  For a more detailed discussion of how resource utilisation can be measured, see the speech “Potential GDP, resource utilisation and monetary policy” by Svante Öberg held on 7 October 2010, and the article “The driving force behind trends in the economy can be analysed using a production function” in the Monetary Policy Report of October 2010.

Barbro Wickman-Parak: Many dimensions to well-balanced monetary policy Speech by Ms Barbro Wickman-Parak, Deputy Governor of the Sveriges Riksbank, at Swedbank, Stockholm, 26 January 2011. *  *  *  Today, I will give an account of my stance at the latest monetary policy meeting in December. This will be a rather brief account, however, because I also want to find time to take up several important but difficult-to-assess factors in the recent monetary policy debate. For example, I would like to discuss different measures of monetary policy expectations and the risks that the development of household indebtedness and housing prices may entail in the long term. I will also say a few words about the concept of well-balanced monetary policy, and then conclude with some reflections on monetary policy decision-making. What I wish to illustrate is that no matter how well-prepared the material we base our decisions on, we are nevertheless confronted with important deliberations that are difficult to assess and which we must take a stand on. All aspects must be discussed from several different perspectives. I believe that this kind of all-round discussion leads to better monetary policy decisions. And it is only natural that this can mean we do not always agree on the repo rate decisions. Monetary policy is not an automatic reading exercise; our assessments are necessary parts of the decision-making process. Strong growth creates a need to gradually raise the repo rate Most analysts agree that the Swedish economy is growing strongly and at a surprising rate.
6  Thus, between December 2021 and April 2023, the cost of deposits with agreed maturity increased by 0.65 pp for households and by 1.5 pp for non-financial corporations (NFCs), while the 12-month EURIBOR rose by more than 4 pp. 7 This cost of equity stands somewhat below the 7.2% seen in 2019, prior to the pandemic. 8  This ratio has fallen by around 30 pp since March 2022, at least partly in response to the Eurosystem’s gradual liquidity withdrawals. 9  Consolidated debt securities grew by 11.7% and represented 13.6% of total assets at December 2022 (10.7% in 2007). 4  2023.10 This was also the case for new lending, although it occurred more slowly in the housing segment than during past periods of monetary policy tightening. By sector, the stock of loans to NFCs and sole proprietors fell by 1.3% year-on-year in March, while loans to households dipped by 1.1%, with the stock of mortgage lending dropping by 1.6%. Credit quality Credit quality has continued to improve. In particular, the non-performing loan (NPL) ratio has maintained its downward movement, to stand at 3.4% in March, its lowest level since 2008 and 1.4 pp below its 2019 level.

In business abroad, ordinary earnings improved notably, driven by the strength of business in Latin America. Thus, the Spanish banks with the most international activity obtained ordinary profit in excess of pre-pandemic levels. 10  Between December 2021 and April 2023, the pass-through was 42% in the case of lending for house purchase and to NFCs, and 27% in other lending to households. 11 The year-on-year improvement in this ratio was driven by loans to firms (-1.8 pp, to 9.7%), while the ratio increased in loans to households (by 0.9 pp, to 5.7%). 12  The cumulative decline from the December 2012 peak is 79.6%. 13  ROA excluding the windfall tax on banking sector profits and other extraordinaries rose to 0.83% in Q1. 14  By comparison, net interest income rose by 17.2% between March 2014 and March 2019 and fell by 1.8% between March 2019 and March 2022. 5  Dividend payments amounted to more than € billion in 2022, with a payout ratio of 40%, similar to the pre-pandemic level. Also noteworthy were the rise in earnings per share and the sharp increase in share buy-backs made by some banks, the aim being to subsequently cancel the repurchased shares and reduce share capital, thus providing additional remuneration for shareholders. Solvency After falling by 25 bp in 2022, in 2023 Q1 the CET1 ratio was virtually unchanged on the same period of 2022.
The increase in the repo rate is in line with the repo rate path expected by the market and which was used as a basis for the inflation forecast. On the one hand, the high GDP growth indicates that inflation could rise more quickly in future than we assumed in June. But on the other hand, productivity has been slightly stronger than expected, which has contributed to holding back cost developments and the rate of increase in unit labour costs. This has a dampening effect on inflation. However, there are indications that the labour market is beginning to strengthen, which should contribute to rising cost pressures. Our overall assessment was that inflation will increase and will be in line with the target a couple of years ahead, given that the repo rate is increased approximately in line with market expectations. Our assessment at the monetary policy meeting was that the upside risks and downside risks were roughly equal. Among the upside risks we mentioned were higher energy, oil and electricity prices, with a risk of contagion effects and a higher rate of wage increase following on from good growth in the economy. The downside risks included the continued strong domestic productivity growth and international price pressures. With regard to household indebtedness and house prices, we expect that the growth rates will slow down, but we have not yet seen any certain signs of this. The picture painted earlier in the year still remains largely unchanged.

Uncertainty in theory Our forecasting ability is thus very limited one year ahead and almost non-existent two and three years ahead. The best forecast we can then make is normally to assume that inflation will be 2 per cent in two and three years’ time. But that is not much help when shaping monetary policy. At the same time it is reasonable to assume that monetary policy will actually affect inflation two and three years ahead and that we therefore need forecasts as a basis for monetary policy. So what can we do to manage the uncertainty in monetary policy? In a linear model, where inflation depends on the interest rate and an uncertainty term with a mean value of zero, where the parameters are known and constant, and with a quadratic objective function (loss function), the uncertainty does not matter with regard to which interest rate should be chosen to minimise the loss function.10 It is enough to take into  8  Prior to 2007 we first based the forecasts on a constant repo rate and then on estimated market expectations. It is possible that we could have made better forecasts with a different interest rate assumption. To be able to comment more strongly on forecasting ability, one should actually base the calculations on longer periods of time. One should also compare with the historical series available at the time the forecasts were made. 9  The figure is based on the period 2005–2010. 10  See, for instance, L.E.O.
Second, this finding implies that monetary policy, which typically affects the level of slack by steering financing and credit conditions in the economy, also retains significant influence on inflation outcomes. Third, domestic slack has not been the only disinflationary factor. To understand the drivers of low inflation, we thus need to look further afield – for instance, at shocks that have driven a wedge between the underlying relationship between inflation and economic slack in recent years. Cost and mark-up shocks Cost and mark-up shocks are forces that may have reinforced the disinflationary pressures exerted by economic slack during the crisis, while offsetting the inflationary pressures generated by the gradual reabsorption of slack thereafter. In the Phillips curve framework, such shocks would materialise as downward shifts of the curve that counteract upward movements along the curve on account of the compression of slack. One such force is a shock to the cost structure of firms, deriving, for instance, from fluctuations in import prices. The fall in oil prices to historically low levels between 2014 and 2015 is a prominent example of this type of shock as it directly reduces firms’ production costs, as confirmed by ECB staff analysis.5 According to the same analysis, the drag of global factors on inflation has, indeed, more than compensated for the improvements in domestic drivers. Changes in firms’ ability to charge mark-ups over their own production costs can further blur the observed relationship between inflation and economic slack.

You have clearly argued in favour of indicating who voted for what and why. Now it seems that these will be more like summary accounts indicating the primary arguments. My opinion has not changed. I do indeed believe that demands are higher today in terms of transparency. The ECB was once right at the forefront in this regard, when it introduced its monthly press conferences. Now, though, we are lagging way behind when you see what other central banks are doing. That’s why I believe that publishing accounts that summarise the general course of the discussion would be helpful. I personally would also be in favour of indicating how people voted. That would require all members of the Governing Council to explain how their own arguments and their own voting behaviour were in line with the ECB’s European mandate. What about the argument that individual central bankers would then be put under pressure? I think the concerns that the pressure would become too great have been exaggerated. Someone who takes on a job like that must be capable of withstanding pressure. Nobody will be put in prison for voting for an interest rate rise in the euro area. People shouldn’t be that sensitive in this regard. I was in favour of OMTs because they were – and still are – the right response for Europe, despite the fact that many in Germany are opposed to them. The OMT programme has made a significant contribution to the easing of the euro crisis.
Second, the recent data suggest that the downtrend in the inflation rate may be coming to an end. For example, the core personal consumption expenditures deflator rose at a higher rate over the past three months than during any other 3-month period since mid-2012. Third, measures of longer-term inflation expectations, whether discerned from financial asset prices or from surveys of households or professional forecasters, remain well anchored at levels consistent with our 2 percent objective. This is important because inflation expectations are a major determinant of the inflation process. As long as inflation expectations stay well-anchored, it will be hard for inflation to fall further. Putting these factors together along with my forecast of a gradual pickup in real economic activity, my outlook is for inflation to drift back toward our 2 percent objective over the medium term. However, much like the case of the real growth outlook, there is significant uncertainty around this forecast. Monetary policy So what does this all imply for monetary policy? As you are aware, at last week’s FOMC meeting we made no changes to our monetary policy. In particular, the Committee decided to continue to purchase long-term Treasury securities and agency mortgage-backed securities  4  BIS central bankers’ speeches  at a monthly pace of $ billion and $ billion, respectively.

First, we want to be assured that there are no glitches operationally with somewhat higher transaction volumes than in previous tests, that we can accept cash from a larger array of counterparties, post collateral in the tri-party repo system and reverse the transactions each day smoothly. Second, while the limited size of the operations during this exercise will prevent the operations from having a significant impact on market rates, we will observe how the facility impacts individual  6  During the testing phase, a ceiling will be placed on the maximum amount that can be invested per counterparty. BIS central bankers’ speeches  7  investor demand relative to other market rates. Additionally, we can see how sensitive that demand is to changes in market conditions such as quarter-end that increase the demand for safe assets. These observations will give us some insight into how the facility could affect the entire constellation of money market rates. Only by testing and learning will we be able to assess how best to use the facility. In conclusion, let me turn back to the economic outlook and the role of monetary policy. I do believe that we are making progress towards our objectives of maximum sustainable employment in the context of price stability. The economic fundamentals are improving and I expect that the healing process will continue in the coming months and years. At the same time, it is important to recognize that the financial crisis generated significant headwinds that are only slowly abating.