samchain/econo-pairs-v1 huggingface dataset:
UK-specific factors also have had a particular effect on the price of long-dated UK government debt, which fell very sharply over a very short period, leading to dysfunction which, had it continued or worsened, would have been a material risk to UK financial stability. The Bank started intervening in this segment of the gilt market on 28 September, in a timelimited and temporary way. Because this is not a monetary policy operation – although it involves buying assets I think of it as an operation designed to buy time - I won’t say any more about it here[5]. Markets continue to be volatile and so extracting any signals from the noise is even more challenging than usual. One key consideration for the MPC at its upcoming meetings will be whether the recent repricing of UK assets reflects a changed assessment by markets of the UK macroeconomic policy mix between fiscal and monetary policy[6]. The extent to which that can be determined will depend on whether markets settle at a new level, which itself will depend in part on getting a clearer picture on fiscal policy and the fiscal outlook. Prospects for inflation What does all this add up to in terms of the overall impact on the economy and on inflation. An obvious starting point might be to look at the evolution of our forecasts over the last year in response to the four shocks I’ve highlighted and other developments.

Chart 8: Financial market medium term inflation compensation (5y2y forward swap)  Sources: Barclays live and Bank calculations. The Monetary Policy Response Let me conclude by setting out how in response to these developments the MPC is setting monetary policy to ensure that CPI inflation will return to the 2% target in the medium term. Monetary policy is also acting to ensure that longer-term inflation expectations are anchored at the 2% target. The MPC started to tighten monetary policy in December 2021, raising Bank rate from 0.1% to 0.25%. So much has happened since but it is worth recalling that last December was less than three months after the end of the furlough scheme here in the UK and was when the rapid emergence of the Omicron variant was a major concern. It was also three months before the Fed started to tighten policy in the US and almost seven months before the ECB began the tightening cycle in the euro area. Bank rate has been increased at every MPC meeting since December 2021 and was increased by 0.5% at both the August and September meetings, to its current level of 2.25%[9]. Along with two of my MPC colleagues I voted for a larger 0.75% increase in Bank Rate, to 2.5% at the September 2022 meeting. At the time the three of us highlighted that the recent data outturns had already registered more persistent inflationary pressures and that mediumterm measures of inflation expectations remained high.
Today, a central bank in a small open market economy, which would wish to turn a blind eye on the developments in the external environment and focus solely on the developments in the national economy, is doomed to failure. Secondly, globalisation changes the wage and price setting mechanisms in the national economy, which have an impact on the domestic inflation. Globalisation (the growing openness of economies) — through the growing share of countries with low manufacturing costs in the global output ― increases the margin and wage pressures, in consequence lowering the inflation. At the same time, globalisation drives up commodity prices, and thus contributes to — at least temporarily — increased inflation. Thirdly, increased international migration of workforce changes the situation on local labour markets. Where the workforce outflows, the wage pressures increase; in the case of an inflow of workforce, the wage pressures go down. Fourthly, globalisation changes the functioning of financial markets and increases the uncertainty as to the impact of decisions made by the central bank on these markets and on macroeconomic variables. Fifthly, globalisation has an impact on the central bank’s perception of the economic environment and the monetary policy strategy it applies. A fast transfer of the economic know-how (flow of the economic knowledge and analytical methods) changes the methods of economic analysis by central bank economists, as well as the way decisions regarding the monetary policy are made. Sixthly, globalisation increases the risk of speculative bubbles on the assets market.

Supervisors from different nations are working together in an effort to create more effective cross-border crisis management tools and resolution regimes, but this work is still in its very early stages and there are formidable obstacles to overcome. A second challenge is the uneven progress that has been made in reforming bank regulation and supervision across the different jurisdictions. For example, in some cases, the supervisory authorities have been quite forceful in making banks domiciled in their countries raise capital. In other cases, the response has been less aggressive. The uneven progress of reform makes comprehensive reform more difficult. It shifts the tenor of the discussion away from what is the proper macroprudential framework and set of capital and liquidity requirements to one that focuses too much on issues of relative competitiveness. Too often the questions asked are: What is most beneficial to the banks of my particular country? Do the regulations bolster or harm my “national champion”? The focus shifts away from the goal of bolstering global financial stability to finding ways of tilting or adjusting the new standards to achieve a national competitive advantage. This is in not in anyone’s interest. As discussed earlier, every nation has an interest in promoting financial stability globally, since the effects of systemic financial stress in one place can swiftly spread throughout the global economy. Moreover, although a relatively loose regulatory regime may attract business from other financial centers, there is no free lunch here.
As a result of both productivity growth and the favorable world inflation environment, core consumer price inflation (CPI) - excluding the more volatile food and energy sectors - has been running about 2% recently, down from 3% in 1995. As measured by the personal consumption expenditures deflator (PCE), core inflation is even more subdued, rising by only 1½% a year over the past few years. As a central banker, however, I cannot help but register concerns about some recent developments. As the expansion has progressed, signs of imbalance or strain have begun to appear in the US economy, especially in relation to the world economy. Commodity prices, for example - and not just oil prices - have increased rapidly in recent months, as world growth has bounced back sharply in 1999. For example, on a year-over-year basis, prices for crude materials, excluding food and energy, were up 15% as of February. In addition, strong consumption growth in the United States has been fueled in part by an inexorable decline in the personal saving rate. As I have noted, however, these declines in personal saving rates may to some extent be due to technical measurement issues. Moreover, the US current account deficit has also widened markedly over the past several years, with corresponding large surpluses in Asia and Europe. The outlook is for continued worsening in the deficit that had already reached a record last year, at about 4% of GDP.

I believe that changing private sector expectations and reducing microeconomic constraints on the economy are key in Japan today. Japan historically has had a tremendous ability to capitalize on technological innovation. While productivity growth has been choppy - the result of cyclicality in the economy - there has been overall moderate growth. In the first half of 1999, in fact, GDP growth was unexpectedly strong, but it fell back in the second half of the year, owing largely to weaker private consumption. In 2000, most forecasters expect a renewal in growth, supported by a new round of fiscal stimulus, announced in November, and a broad-based recovery in business fixed investment. Developments in the euro area are very interesting. The bold and historic effort of 11 of the European community countries coming together to unite their economies in a common currency and to form a single market appears to be bearing fruit. In the run-up to the introduction of the euro, many of the euro area countries struggled to bring down their fiscal deficits and reduce inflation to a low level. These efforts were preceded throughout the 1980s and 1990s by measures to break down trade barriers and harmonize some regulations while eliminating others. Not surprisingly, these developments have coincided with both strong business  5  BIS Review 29/2000  fixed investment and labor productivity growth in manufacturing. Today, we see the euro markets starting to coalesce and expand.
Which is why central banks and monetary authorities spend considerable resources and efforts in designing their banknotes not only, to be as aesthetically pleasing and attractive as possible, but more importantly, to appropriately portray the unique identity of their respective countries. Throughout history, banknotes incorporated significant natural and cultural aspects of the country, encompassing nature, history, society, economy and technology. Bank Negara first issued currency in 1967. And since then, uniquely, our banknotes have always featured the first Yang di-Pertuan Agong, Tuanku Abdul Rahman ibni Almarhum Tuanku Muhammad on the obverse to signify the stability and reflect the unity of our country under the system of Constitutional Monarchy. On the reverse, however, our banknotes have had different icons over the last five decades, with the most recent banknotes series aptly themed “Uniquely Malaysia”, due to the icons that can be found exclusively or largely in Malaysia. It has been a practice for most countries to change banknotes icons from time to time, and to include new theme and incorporate the latest security features. The earliest banknotes might have been first issued in China during the Han Dynasty in 118 BC. Throughout history, banknotes have always signified pride, prestige, authority and sovereignty of the country. And as such, it is not surprising the authorities would always use the best technology available in the production of banknotes. Modern banknotes are extremely sophisticated with so many security features embedded, some of which are invisible and only visible using machines.

Latest digital and printing technology has revolutionised the banknote production to the highest degree of speed, accuracy and consistency, using technologically enhanced high speed printing machines to print millions of banknotes every day. Despite the rapid innovation of technology, one fundamental and specific aspect of banknotes production has never changed. When it comes to banknotes design, no technology can replace the required dexterity and the innovative mind of a design artist. Banknotes design has always been made by hand and the work is inevitably involves a process that is time consuming and requires painstaking efforts. The artist has to meticulously draw in great detail every aspect of the banknotes. Indeed as you will see at the exhibition, all these micro lines of icons give a distinguishing character to the banknotes and contribute to their uniqueness. But all the details serve more BIS central bankers’ speeches  1  than an aesthetic purpose. They also serve as the first line of defence against counterfeiting. So far, no digital copier, despite having the best resolution of contemporary technology, is able to copy micro lines and lettering on the banknotes. So if any of you here have any doubt whether a banknote in your wallet is genuine or not, place the banknote under a magnifying glass and look for micro lines. You will be enthralled at how detailed the banknote design when you get to see the blown up version of banknotes on display here in this exhibition.
Bilateral trade balances that are not in equilibrium are not a problem per se, and are instead much more an expression of the respective parties focusing on their own strengths. A country’s deficit with one trading partner can be financed through its surplus with another. That said, I do not want to paint too rosy a picture of the current trading system. This brings me to the second facet of the concept of ‘fairness’. The accusation that not all countries play by the rules of global trade is not without justification. Chart 3 shows that the number of tariff and non-tariff barriers to trade has increased again of late – with the latter often opaque and thus potentially even more damaging than customs duty. Examples include not taking due account of the principle of reciprocal market access or the protection of intellectual property, or distorting the free exchange of goods and services by way of subsidies. From this perspective, there is a valid point in calling for fairness. After all, international trade is in fact only fair if everyone plays by the rules of the global trading system. I will come back to this point later. No country wins a trade war The import duties recently imposed or increased by the US on certain goods have already prompted the first counteractions from the trading partners concerned. Were the spiral of protectionist measures and retaliation to continue, this could develop into an all-out trade war, which would have drastic consequences for the global economy.

Central banks cannot directly shape the international trading system, nor can they prevent protectionism. Should the current trade disputes escalate into a fully fledged trade war, the SNB would have to adapt to this new backdrop. The uncertainty that a flare-up in protectionism would bring would nevertheless complicate the fulfilment of our mandate. Let me make one thing clear: The tariffs that have been imposed in the past few months will not plunge the world into a recession. Any such fears are exaggerated. As Chart 6 shows, the International Monetary Fund, in its recently published outlook, continues to forecast steady growth in global GDP and world trade. 7 Should the protectionist spiral continue, however, this could stall the global expansion phase and fuel inflation. Switzerland would be well advised to actively advocate appropriate trade rules at the international level, and ensure that these are kept to in spirit and not just by the letter. Free trade is one of the key driving forces behind our prosperity, and we should do our utmost to safeguard its achievements. 7  Cf. International Monetary Fund (October 2018). Page 8/9  Bibliography Autor, David H., David Dorn and Gordon H. Hanson (2016), The China shock: learning from labor-market adjustment to large changes in trade, Annual Review of Economics, 8, pp. 205– 240. Bank for International Settlements (2018), Annual Economic Report, June. Berthou, Antoine, Caroline Jardet, Daniele Siena and Urszula Szczerbowicz (2018), Quantifying the losses from a global trade war, Eco Notepad, Banque de France blog, 19 July.
Of course, not many other observers saw the crisis coming either. However, we did draw attention to the problems on the housing and mortgage markets in the United States, and in our Financial Stability Reports we did mention the problems relating to the Swedish banks’ credit expansion in the Baltic countries. But the new feature of this financial crisis was that the banks were unable to fund their operations on the market and this was something we were not prepared for.14 Second, the Riksbank reacted quickly and forcefully once the crisis hit Sweden. The Riksbank’s extensive lending to the banks and the rapid reduction of the repo rate to an exceptionally low level softened the impact of the crisis on the Swedish economy. Together with an expansionary fiscal policy this kept up the level of domestic demand and meant that employment decreased less and unemployment increased less than could have been expected, and that inflation was kept at a reasonable level. Underlying inflation was kept close to 2 per cent and inflation expectations five years ahead, which had increased before the crisis, fell back again and stabilised at around 2 per cent. Monetary policy needs to become less expansionary in the period ahead My third thesis is that the repo rate needs to be raised at every meeting this year, and perhaps next year too. I will now explain why I make this assessment.

Back then, monetary policy was faced with the dual challenge of inflationary pressures from escalating global commodity and food prices, as well as headwinds in global growth from the unstable global financial markets. In this case, despite the upside risks to inflation, monetary policy was maintained given the need to balance against the weakening global growth prospects and its implications on the domestic economy. BNM recognised that the upside risks to inflation originated mainly from supply-driven factors, in which the members opined that monetary policy was not the appropriate tool to alleviate the impact. In this situation, raising rates to achieve a stable inflation at all cost would be against our philosophy and against public interest. During that time, our monetary policy inaction was criticised for being behind the rate-hike curve relative to the actions taken by other regional central banks. But in retrospect, we were attempting to do the right thing based on the prevailing data and our assessment. We would like to think that our departure from the convention stood the test of time, and that we were eventually proven right when Malaysia was able to withstand the crisis. Staying committed to our decisions, however, does not imply inflexibility in our approach. When global conditions deteriorated rapidly, monetary stimulus was swiftly and significantly front-loaded between November 2008 and February 2009, to cushion the domestic economy from adverse spillovers.
This has shown up in increased productivity and weakly rising employment. The opposite has occurred in the United States: sluggish real wages have limited the need to rationalise labour and invest in capital-intensive equipment and this has resulted in rapidly rising employment.7  6  Krugman, P. (1994), "Past and Prospective Causes of High Unemployment," in Reducing Unemployment: Current Issues and Policy Options, Federal Reserve Bank, Kansas City. 7 See Lindbeck, A. (1996), "Sysselsättningsproblemet i Västeuropa" (The problem of employment in Western Europe), Ekonomisk Debatt 24:7.

12  10  10  8  8  6  1 6 -6 4 y rs . 6  4  4  2  2  0  0  76  77  78  79  80  81  82  83  84  85  86  87  88  89  90  91  92  93  94  95  96  S o u rce : S ta tis tics S w e d e n  approximately the same magnitude as the unemployment rate.1 Sweden’s increase in unemployment can in this way be estimated to cost around 10 per cent of GDP a year, which is equivalent to SKr 150 billion. Considering the sensitivity of general government finance to variations in unemployment and production, the cost to the public sector, in the form of lower  1  Assuming that changes in the capital stock roughly parallel employment and that average productivity is constant. BIS Review 38/1997  -4-  tax revenue and increased expenditure on unemployment support, for example, may actually be as high as 9 per cent of GDP or SKr 135 billion.2 Conversely, an appreciable reduction of unemployment implies decreased social tensions as well as substantial economic gains.
Much of this stronger spending was for durable goods, particularly motor vehicles. In the fourth quarter of 2011, sales of light-weight motor vehicles reached the highest quarterly rate since the first half of 2008. This increase is encouraging because it suggests that consumers are now more able to borrow money to finance their purchases of cars and trucks. However, I must note that this boost is likely due in part to temporary factors. First, vehicle sales in the middle of 2011 were depressed due to supply chain disruptions stemming from the tragic earthquake and tsunami in Japan. In addition, a stimulus-related tax provision that allowed businesses to immediately expense some investments expired at the end of 2011. So, some purchases were no doubt timed to occur before that expiration. Moreover, for goods and services other than durable goods, the rate of growth of consumer spending has been rather tepid. The picture that emerges – up to now – is of a consumer who continues to be cautious. In addition to stronger growth of consumer spending, manufacturing output has firmed over the past several months. For example, the widely followed Institute of Supply Management manufacturing composite index rose from October to December 2011. Improvements were particularly notable in new orders and production activity. Stronger growth of consumer spending on durable goods is likely boosting the manufacturing sector. In addition, growth of U.S. exports has been well maintained, while import growth has been subdued.

4  BIS central bankers’ speeches  The housing bust and the onset of the recession in 2007 strained state and local government finances. Most local governments rely heavily on property tax revenue to fund their schools and other activities. This was particularly true during the first half of the decade, when the housing boom strongly supported property tax revenues. Then came the bust; steep declines in the housing market led to corresponding drops in local property tax revenue. State governments’ revenues also fell, as rising unemployment cut income tax revenue and reduced consumption shrank sales tax revenues. Since most state and local governments spend at least half of their budgets on education, these developments have constrained funding for our primary and secondary schools. To stave off drastic state and local government spending cuts, the federal government allocated $ billion to states, including New York and New Jersey, for education through the American Recovery and Reinvestment Act (ARRA). Research done here at the New York Fed reveals that school finances in both New York and New Jersey were impacted by the Great Recession, with New Jersey sustaining particularly severe cuts.4 ARRA funds helped school finances in both states, yet did not completely compensate for lost state and local revenues. With ARRA funding drying up and our local and state economies still under stress, a question looms before us. How might we expect school finances and student learning to fare in the near future?