samchain/econo-pairs-v1 huggingface dataset:
Irma Rosenberg: Monetary policy in Sweden Speech by Ms Irma Rosenberg, Deputy Governor of the Sveriges Riksbank, at the Swedbank, Stockholm, 18 September 2006. *  *  *  Thank you for the invitation to come here and speak. The topic of the conference is economic prospects and I will of course provide my views on these. However, I will speak in fairly general terms – a more detailed analysis will be presented in the Riksbank’s Inflation Report, which is published at the end of October. Before I move onto economic developments, however, I would like to take this opportunity to say a few words about how monetary policy is conducted in Sweden in general, or the monetary policy strategy, as it is usually called. More specifically, I intend to take up some questions that have arisen in the discussions in the media and elsewhere as there still seems to be some confusion. This applies in particular to the objective of monetary policy. Do we attach less importance to the inflation target now, or have we even introduced other objectives in addition to the inflation target? Let me emphasise right now that no such changes have been made. Our focus is on the inflation target and the central aim is to anchor inflation expectations in the economy around this target. However, when we formulate our monetary policy we also give consideration to the way the rest of the economy is developing. It is our reasoning on this that I intend to begin with.

If, for instance, there is a shock that leads to inflation being pushed upwards despite weak demand, a very rapid return to the inflation target would entail large negative effects for the real economy – an even greater slowdown in the already weak demand – than if the recovery was allowed to occur at a slower pace. If inflation is instead held back despite good  BIS Review 87/2006  1  growth in demand, attempts to quickly return it to target through very expansionary monetary policy could lead to the economy overheating. Over time a policy that quickly subdues inflationary impulses would perhaps result in more stable inflation, but there would be substantial fluctuations in the real economy. We have chosen a two-year horizon for monetary policy because this is considered to give sufficient scope in most cases to ensure acceptable developments in the real economy. However, the rate at which it is desirable to bring inflation back on target depends on what shocks the economy has suffered and how substantial they are. Sometimes deviations from the target may be so substantial that there is reason to allow inflation to return to target beyond the normal two-year horizon and in this case we explain the reasons when we announce our decision. However, the ambition remains the same; that is, a desire to ensure that inflation is low and stable a few years ahead, while giving some consideration to the stability of the real economy. What significance do house prices and household indebtedness have?
During 2010 the Banco de España also pursued a series of initiatives to help generate muchneeded confidence. Firstly, in July it took transparency to a new level with the publication of the results of the stress tests, both because of the high proportion of institutions analysed (representing 95% of the system, compared with the figure of 50% required in Europe) and the degree of detail of the information provided. Secondly, it reformed the provisioning system that same month, to ensure appropriate balance-sheet write-downs. And thirdly, it urged institutions to provide the market with highly accurate information on their exposures to the real estate development and construction sector and on their financial structure and liquidity position. Likewise in July 2010, Parliament approved the savings banks reform, included in Royal Decree-Law 11/2010. This paved the way for a new legal structure for savings banks, under which the pursuit of their banking activity may be through a bank, to which the bulk of assets and liabilities are transferred. This corporate model, conceived for adoption on a voluntary basis, although it has become obligatory for savings banks that receive further aid as I shall mention later, is imposing itself extensively on the sector owing to its advantages in terms of the ability to tap the markets for capital, to promote best management practices and to generate the necessary confidence on the part of customers and investors.

Experience suggests that financial markets react only with a substantial lag to a deterioration in the fiscal situation, but the reaction can then be quite drastic, coming too late for a timely correction, making the crisis more severe and placing a large burden on all participants. In view of this, the Governing Council has expressed its regrets that, last November, the ECOFIN Council decided not to act on the basis of the European Commission's recommendations in the excessive deficit procedure. We also respect the Commission's decision to seek legal clarity with respect to the excessive deficit procedure. It would surely be wrong to declare the Stability and Growth Pact as dead. In fact, it is very much alive. We do not believe that it is advisable to amend the text of the SGP. We think however that, without actually changing the wording of the Pact, it would be possible to improve its implementation, in particular by better analysing the structural imbalances as well as by strengthening the incentives for sound fiscal policies during periods of strong economic growth. The introduction of such policies will also strengthen economic confidence and support demand in the short run. Indeed, confidence among European citizens is vital for a stronger economic recovery and sustained growth. The ECB’s Governing Council recognises that the still low level of consumer confidence is related in part to the debate about the appropriate path for fiscal policy and structural reform in many countries in the euro area.
Resilience: three lessons from the financial crisis1 Speech given by Dave Ramsden, Deputy Governor for Markets & Banking  Inverness Chamber of Commerce 30 May 2019  1  With thanks to Tom Smith for his assistance in preparing these remarks and to staff across Bank, including Alex Baiden from the Bank’s Advanced Analytics division and Nick Bate and Liam Crowley-Reidy from the Bank’s Monetary Analysis directorate, for their many contributions, as well as my colleagues on the MPC for their helpful comments and suggestions. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches  1 Introduction It’s great to be here in Inverness, and to be speaking here this morning. My talk today is going to focus on resilience. The first definition of resilience thrown up by Google is “the capacity to recover quickly from difficulties; toughness”. It seems apt that I should be focusing on this here in Inverness as Scotland itself is a famously resilient nation. Robert the Bruce was taught resilience by a spider. Scotland’s mountains epitomise geological resilience and tests the physical resilience of walkers and climbers. The Scottish economy has been through some tough times, but proved relatively resilient during the financial crisis, with Scottish onshore GDP falling much less than overall UK GDP. Even the existence of the Loch Ness monster has proved resilient to continued scientific investigation. And resilience is a word that you hear a lot these days (Chart 1). Psychological resilience is lauded as a virtue as life becomes more complex and challenging.

It has picked up a little in the recent data as US-China trade tensions intensified, but has also fallen back to below historical averages. This apparent disconnect does not necessarily mean that markets are complacent – the policy uncertainty index might be more sensitive to short-term political developments, while market indices could also be factoring in a belief that monetary policy might be able to offset the impact of shocks. But if market participants are underestimating the extent of political risks materialising, that suggests the potential for sharp price corrections if those shocks do come about. The second risk I want to highlight today, and unarguably biggest risk to the UK economy and UK financial stability, remains that of a Brexit outcome of no deal and no transition. That would have large negative economic effects, both in the Bank’s view and in the views of the businesses we talk to up and down the country (Chart 11). This has been a key focus for the FPC in particular since the Brexit referendum, and we have taken many actions to prepare for and respond to it.
2  BIS central bankers’ speeches  The accountant’s report showed a solvent but illiquid Barings. Back from the Zoo, Lidderdale began to construct a financial “lifeboat” for Barings, with a contribution from the Bank but also from the commercial banks. This was the system acting in support of the system. The lifeboat was launched and Barings was saved, in what has become known as the “crisis that never became a drama”.4 The Bank’s lifeboat has since been re-launched on more than one occasion. A second financial lifeboat – different in detail, but identical in principle – was launched by the Bank of England in the early 1970s. Then, it was intended to save the small banks rather than the large. It, too, steadied some sinking ships. Third time, however, was not so lucky. On 24 February 1995, it was Barings Bank who were again knocking on the Bank of England’s door for help. Bank Directors were again summoned on a Saturday. I myself was caught by a TV crew entering the Bank on that Saturday morning, arousing suspicion something was amiss. In fact, I had not been recalled to save the day. (I believe I was filmed wearing a tracksuit.) And I was as blissfully unaware of Barings’ problems as most of the rest of the world. (I was at the Bank completing a research paper on “A Structural Vector Autoregressive Model of the Monetary Transmission Mechanism”.) Life was easier then.

Back then, press interviews were rare and scripted to within an inch of their life. In the past year, Bank officials gave around 65 speeches and over 200 press interviews. In Montagu Norman’s day, the combined total was one. The days of “keeping the Bank out of the press and the press out of the Bank”14 are well and truly gone. Earlier this year, the Governor gave the Bank’s first live peacetime radio address to the nation for 73 years. The Bank Tweets, fortunately with rather less vigour than your average Premiership footballer. Soon we will have, for the first time in history, published minutes of the Bank’s Court of Directors. The Governor has appeared before the Treasury Committee on no less than 47 occasions since he took office. In 2011, a word search of “Mervyn King” in the press revealed more hits than “Kylie Minogue”. To my knowledge, this is the first time a sitting Bank of England Governor has toppled the Aussie pop princess in the media opinion polls. Given its new responsibilities, the Bank cannot fail to remain in the public’s eye in the period ahead. Transparency and accountability will remain the watchwords – and rightly so. Conclusion When pressed by the Macmillan Committee in 1930 to explain the Bank’s actions, Montagu Norman replied: “Reasons, Mr Chairman? I don’t have reasons, I have instincts”.15 I suspect such an answer would work less well with today’s Treasury Committee, to say nothing of today’s media. All public policymakers have an obligation to explain.
A cross-check with the information from our monetary analysis confirms that the underlying pace of monetary expansion continues to be moderate, while monetary liquidity remains ample. As expected, the pace of economic growth in the euro area decelerated in the second quarter, following strong growth in the first quarter. Looking ahead, we expect the euro area economy to grow moderately, subject to particularly high uncertainty and intensified downside risks. At the same time, short-term interest rates are low. While our monetary policy stance remains accommodative, some financing conditions have tightened. It remains essential for monetary  2  BIS central bankers’ speeches  policy to focus on its mandate of maintaining price stability over the medium term, thereby ensuring that recent price developments do not give rise to broad-based inflationary pressures. A very thorough analysis of all incoming data and developments over the period ahead is warranted. Inflation expectations in the euro area must remain firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. Such anchoring is a prerequisite for monetary policy to make its contribution towards supporting economic growth and job creation in the euro area. We will continue to monitor very closely all developments. Turning to fiscal policies, a number of governments have announced additional measures to ensure the achievement of their consolidation targets and to strengthen the legal basis for national fiscal rules. To ensure credibility, it is now crucial that the announced measures be frontloaded and implemented in full.

From that time, daily and monthly variations in the krone exchange rate show that the krone is floating. Our analyses suggest that oil price fluctuations are just one of several contributory factors behind the variation in the krone exchange rate in recent years.4 In the short term the krone exchange rate is also affected by uncertainty in the global economy and turbulence in international financial markets. The Exchange Rate Regulation - which is the mandate assigned to Norges Bank by the political authorities - states that monetary policy shall be aimed at maintaining a stable krone exchange rate  4  See Bernhardsen and Røisland (2000). 7  BIS Review 105/2000  against European currencies. Since 1 January 1999, Norges Bank has defined European currencies as the euro. The Exchange Rate Regulation takes into account that the krone exchange rate may remain outside its normal range. In the event of significant changes in the exchange rate, Norges Bank shall orient instruments with a view to returning the exchange rate over time to its initial range. The concept “significant changes” is not quantified. The term must be given an economic content. Norges Bank considers an exchange rate change to be significant if it influences expectations concerning price and cost inflation to the extent that the change in the exchange rate may become self-reinforcing.
Not too long ago, the advent of the Internet heralded a new era for payments by enabling transactions to be conducted remotely using online banking services and payment cards. Today, payment technologies have evolved rapidly to include an alphabet soup of different modes of payment – for example RFID, NFC and QR just to name a few. At the same time, new use cases leveraging on biometrics, open API, artificial intelligence and blockchain are also being developed. While such technological innovations demonstrate great potential, the full impact and resultant risk may yet to be fully understood. Cyber security is also a fast-growing area of concern, given the sophistication of cyber threat actors and as more consumers and businesses are plugged into digital payments. This is further 1/6  BIS central bankers' speeches  compounded by the interconnectedness of payment systems which heightens contagion risk. While sources of risks are borderless, the non extra-territorial nature of most payment regulation and supervision presents a key challenge to effective regulatory oversight. Concentration risks also require close attention, given the largely centralised model of prevalent payment systems. Network effects are a double-edged sword. As a payment system becomes more widely used, the implications of operational disruption would also be more far-reaching. In 2018, we have seen two global card networks face service disruptions, affecting at least five million transactions in Europe and the US. If the frequency and magnitude of such disruptions increase, there is a real risk that public confidence in digital payments would be undermined.

This discussion highlights that current account surplus countries can forego, at least temporarily, the required adjustment by accumulating international reserves instead. The sustainability of these imbalances, and the extent to which they have contributed to the recent global financial crisis, is still under discussion. BIS Review 65/2010  1  The question of the reserve asset has often been at the center of the debate. But as Mark Carney has recently argued, the adjustment mechanism may be more important than the choice of reserve assets. If adjustment were rapid, symmetric, and global, and if adjustment costs were fairly distributed amongst countries, we probably would not need to gather here today. Unfortunately, this is not the world we live in now. Historically, exchange rate flexibility has often been the answer. While it is not a silver bullet, it remains true that adjustment through the exchange rate is usually faster, and in the end less costly than adjustment through prices and wages. At the same time, of course, discontent with what is often perceived as excessive exchange rate volatility has been an important source of dissatisfaction with the present international monetary system. What constitutes excessive exchange rate volatility, and whether domestic policies or the international monetary system are at the root of it, is a matter of legitimate debate. III.
But not only that. The banks should also hold buffers over and above the minimum requirements. One such buffer is what is known as the capital conservation buffer. The further a bank is from meeting the capital conservation buffer requirement, the more limited its capacity to pay dividends to shareholders. The reason is that one wants to prevent the banks from showering its owners with riches in the good times, and then being caught unprepared when the economic climate changes. If one adds this buffer, the requirements for common equity Tier 1 capital is 7 per cent. Moreover, national authorities will have the opportunity to force the banks to build up extra buffers during economic upturns, so that they can more easily weather difficulties when there are downturns. The Swedish banks already comply with the capital requirements stipulated in the new Basel regulations. And this is an important condition for them to be able to fund themselves on the markets. 4  BIS Review 159/2010  Liquidity regulations increase resilience when funding is difficult But even if a bank is well-equipped in terms of capital, it can nevertheless come unstuck if it does not have sufficient liquidity buffers. And this is what happened to many banks during the crisis. To ensure the banks are better-equipped, the Basel Committee has agreed on introducing requirements regarding the banks’ liquidity management. These are entirely new regulations – there have previously not been any regulations in this field at all.

And the tougher the regulations, the greater the reason for the banks to try to circumvent them. If they succeed, no one has won. Instead, there is a risk we will be lulled into a deceptive security, despite the risks merely being moved or hidden in other forms. I might also add that regardless of which regulations are introduced, one still needs effective oversight and supervision of the financial system as a whole and of individual institutions. If we take all of these aspects into account, I believe the Basel Committee’s proposals are a successful balancing act. They entail a substantial upgrading of the bank system in terms of resilience. And the costs to the banks and society are small. BIS Review 159/2010  7  Long phase-in period The Swedish banks are well-capitalised and the costs of the new capital requirements are therefore small or non-existent. But we must remember that the situation is more difficult for many banks around the world. If we force the banks to observe the new teachings immediately, their ability to offer loans to companies and households may be impaired. This could jeopardise the economic recovery. Because although the world economy appears to be slowly recovering, the situation is still fragile. To avoid this, the Basel Committee has agreed on a long phase-in period. Some of the new regulations will begin to apply in 2013. Most of them will be phased in gradually. It will take a further ten years or so before all of the regulations apply in full.
Financial sector weakness was at the heart of the problems in Asia, a crucial element in Argentina and Mexico earlier in the decade, and a contributing force in Russia. Just as strong financial systems act as stabilizers when a domestic economy is battered, weak financial systems amplify the scope and reach of the problems, making bad situations worse. While important progress has been made in rehabilitating Asia’s financial systems, a great deal remains to be done to continue the strengthening of weakened financial and corporate sectors, and improve the region’s resistance to future problems. I am well aware that universal policy prescriptions are difficult to draw, given the wide range of experience and initial conditions. Indeed, individual countries in Asia have followed differing reform strategies, and the results of these efforts will help to inform the ongoing debate. Nonetheless, international experience with financial sector reform suggests a number of cautionary lessons. Let me cite a few: •  Restructuring and reform must adequately address both the current “stock” of problem assets as well as the potential “flow” of new problems attributable to deficiencies in the broader financial system infrastructure. Lack of adequate action on either front can lead to a continuation of the substantial costs of weak banking sectors, sometimes well beyond the immediate crisis itself. •  Clean-up efforts must be sufficient to the task. Half-done measures that leave financial institutions with significant levels of impaired assets at best postpone the reckoning and potentially create incentives for excessive risk-taking.

In my view, the role is quite straightforward: it is to sustain a monetary and banking environment that is conducive to resolving the economic and fiscal problems that face our community - not just in the public sector, but also in businesses and households. This is not the passive, static role that it may seem, as the maintenance of a rule-based monetary system in the form of the Link misleadingly suggests. Indeed, there is the scope - and often the need - for an active and imaginative use of financial, supervisory, communication and other skills. The degree of openness and the relatively small size of Hong Kong's financial system, against the background of globalisation, mean that the maintenance of monetary and banking stability is a particularly difficult task. There is also the requirement, implicit in the Basic Law, to look ahead, and in particular, to develop the financial infrastructure that will secure Hong Kong's position as an international financial centre and provide it with the means to build on that position. And there are other important tasks, such as seeking to help the Government in its efforts to contain the fiscal deficit by achieving a favourable return on the fiscal reserves deposited with the Exchange Fund - subject always to meeting the other investment objectives of the Fund. All of these tasks present challenges to keep me and my colleagues busy enough. But there have also been suggestions that the HKMA should take further steps to help stimulate growth.