samchain/econo-pairs-v1 huggingface dataset:
Christian Noyer: The role of inflation - indexed bonds in the process of setting monetary policy: a central banker’s perspective Speech by Mr Christian Noyer, Governor of the Bank of France, at the Morgan Stanley seminar on indexed bonds, Paris, 9 June 2004. *  *  *  Ladies and Gentlemen, [Dear Friends], It is a great pleasure for me to address you here in the context of the first “Séminaire de Paris” on inflation-linked securities organised by Morgan Stanley. Today, I will focus more specifically on “The role of inflation - indexed bonds in the process of setting monetary policy” from a central banker’s perspective, based on my own experience as the former Vice-President of the ECB and the current Governor of the Banque de France. Throughout my presentation, I will occasionally refer to the monetary policy strategy framework implemented by the Eurosystem in which asset prices, in particular inflation-indexed government bonds, can play a role in the context of our economic analysis. Having said this, I will neither elaborate further on the ECB’s framework nor comment on the last Governing Council’s monetary policy decision. Price indexation of financial contracts is not a new phenomenon. According to Robert Shiller1, the world’s first known inflation-indexed bonds were issued by the Commonwealth of Massachusetts in 1780 during the Revolutionary War. These bonds, the so-called “depreciation notes”, were issued to US Soldiers as deferred compensation for their services. They were mainly designed to deal with severe wartime inflation.

Second, inflation expectations may be used by policy makers to gain information about the setting of short-term interest rates, whereas changes in the nominal yield curve, on their own are of no use. An increase in long-term nominal interest rates may be driven by a rise in the long-term expected inflation rate or a rise in the inflation risk premium, but it may also reflect an increase in long-term real interest rates, driven by some real factors. The two first movements could justify a change in the monetary policy stance, once the nature of the underlying shock and its likely duration have been clearly identified, but such a change may be inappropriate in the last case. Third, information on long-term inflation expectations can provide monetary authorities with a measure of the credibility of their commitment to price stability. The existence of a market for inflation-indexed securities may provide central banks with very useful information, since it may then enable them to identify whether changes in nominal yields mainly reflect changes in the expected long-term inflation rate or rather whether they are due to changes in real yields.
I consider that an important conclusion can be drawn from this: Merely because inflation expectations are close to the target, the Riksbank cannot refrain from conducting an active monetary policy to make sure that it is attained in due course. The price increases we have seen in recent months are not something that monetary policy can affect. But the high inflation we have had in recent months risks setting off a spiral of price increases, wage drift, price increases, wage drift and so on. It is essential to ward off these tendencies in time. Therefore, it was time to adjust the direction for monetary policy. At the monetary policy meeting in April, the Executive Board decided on a less expansionary monetary policy, and the repo rate was raised by 0.25 percentage points. It was important to act in good time. As I see it now, the repo rate needs to be a couple of percentage points higher in a few years’ time. One of the purposes of a less expansionary monetary policy is to slow down economic activity and in this way reduce inflationary pressures in the economy. This can at the same time mean lower activity in the labour market. Here it is important to bear in mind that monetary policy can only affect the labour market in an imprecise way, while labour market policy has a significantly greater capacity to focus on the specific problems. References Boianovsky, Mauro (1998), “Wicksell on Deflation in the Early 1920s”, History of Political Economy 30(2), pp. 219–73.

Shocks can be divided into demand shocks and supply shocks, depending on whether demand or supply is developing unexpectedly. The economic impact of the war in Ukraine can be described as what textbooks call a negative supply shock. This means that activity in the economy is declining, at the same time as prices are rising. In other words, the effect will be stagflationary, that is, we will have a combination of lower growth and upward pressure on inflation.23 Earlier examples of negative supply shocks are the oil crises in the 1970s. In addition, the war in Ukraine was preceded by another supply shock – the pandemic – when large parts of the world economy closed down and distribution chains were broken. As I just described, war does not always entail a negative supply shock. In connection with the Korean War, for example, there was talk of the ‘Korea boom’, because inflation was then largely due to increased demand for Swedish goods. 22 Jonung (1999). 23 There is broad agreement among economists regarding this conclusion. The IGM Forum at Chicago Booth regu-  larly asks a panel of leading economists in Europe and the United States to what extent they agree or disagree with different statements. The survey published on 8 March included the following statement: “The fallout from the Russian invasion of Ukraine will be stagflationary in that it will noticeably reduce global growth and raise global inflation over the next year”. A very large majority agreed, while nobody thought that would not be the case.
In addition, despite a promising domestic growth scenario, the Chilean economy remains operating below full capacity with above normal unemployment levels. This limits inflationary pressures, which is consistent with maintaining a highly and exceptionally expansionary monetary policy (figure 1). On the other hand, financial stress in Europe is raising the level of uncertainty regarding the speed with which the world economy will recover and the smooth functioning of global financial markets. Although the baseline scenario in the two reports we are presenting today assumes that both the world economy and the Chilean economy will keep growing in the coming quarters, the international situation, particularly in Europe, together with its impact on our economy and its implications for monetary policy will have to be assessed carefully and continually. All these elements, which are taken into account in every monthly monetary policy meeting, determined that in yesterday’s meeting we began the process of normalizing the significant monetary stimulus currently in place in Chile. This is the natural step after the gradual withdrawal of the extraordinary facilities for liquidity provision and the term liquidity facility FLAP, implemented in recent years to deal with the severe effects of the crisis of 2008–2009. In the current juncture, it is highly convenient to normalize the monetary stimulus. In the first place, because the current monetary policy instance was implemented in a context of significant economic weaknesses and strong disinflationary pressures observed in the first half of last year. As output gaps have begun to narrow, that dosage of stimulus is not necessary.

The Bingham Report was produced in only a year and contains all that is worth saying about the supervision of BCCI. It was not comfortable reading for the Bank, but the Bank accepted and acted on its findings. The subsequent legal proceedings over thirteen years have benefited only one group at the expense, in the end, largely of the creditors. As Mr Justice Lightman argued in his 2003 Edward Bramley Memorial Lecture, the adversarial system imposes huge costs on litigants and defendants alike. As he put it, “to the great majority of the public the perception (if not the reality) is that the legal system is a profitable monopoly of the lawyers”. BCCI showed that perception was indeed reality. A system that is powerless to prevent a case so hopelessly misconceived continuing for thirteen years requires examination. I very much hope that the Government will look carefully at this case, learn the lessons, and take steps to ensure that such an outcome can never occur again. Finally, who managed to obtain the correct answers to the two questions I gave you at the beginning? Chancellor, you can see that mental arithmetic in the City is not what it was. In fact the answer to the first question is 3/100 or 3%, and to the second question is £ 13s. 9d. - before tax.
Conclusion and the current situation Let me now briefly comment on our most recent interest rate decision. It may appear strange that the Riksbank chooses to raise the repo rate in a situation where inflation is very low. To understand this, it is important to remember that monetary policy must be conducted on the basis of expectations of the future, i.e. forecasts. It is therefore not the present inflation rate we intend to influence, but the expected inflation rate a couple of years ahead. Back in December we envisaged an inflation rate in line with the target towards the end of the forecast period, given a gradual rise in the repo rate during 2006. Information we have received since December indicates that developments will be slightly stronger in Sweden and abroad than we had assumed. As is often the case when making decisions, there are also arguments against raising the interest rate; productivity growth and import prices are continuing to dampen inflation, and inflation is expected to remain low for a large part of the forecast period. One thing that must be remembered when considering our decision to raise the repo rate, is that monetary policy is still expansionary even after this decision, both from a historical perspective and compared with other countries. An interest rate increase of 0.25 percentage points does not mean that monetary policy has been tightened; it is merely the first step towards less expansionary monetary  6  BIS Review 8/2006  policy.

And the Bank intends to consult the market shortly on what the requirements should be in respect of loan-by-loan information for such assets to be eligible in the future. Along with other monetary authorities taking similar actions, 8 standardisation of information provision may help improve investor confidence in the underlying securities. Non-bank lending Also during 2009, the Bank used its market and corporate contacts to identify why bank lending dominated the supply of credit and what the obstacles were to lending from nonbanks. There appeared to be no easy wins but a recent HMT consultation paper which draws  8  6  See the ECB announcement: http://www.ecb.europa.eu/press/pr/date/2009/html/pr091223.en.html. BIS Review 23/2010  heavily on the Bank’s investigation, explores options to facilitate the supply of credit from non-bank lenders. 9 Interactions with other monetary policy actions The commercial paper and corporate bond schemes seem to have been reasonably successful in helping to improve key markets and hence facilitating access to credit, at least for larger corporates. Smaller firms who supply those larger firms, may also have seen some “trickle down” benefits. One indicator of this is that the rise in the level of company insolvencies during the recession has been surprisingly small so far, given the fall in output (Chart 7). But the major supportive factor has probably come from the very low level of Bank Rate and the programme of quantitative easing.
Of course on occasion the flesh proves to be weaker than the spirit - and achieving these macro-economic objectives is not easy in practise even as a technical matter. But the intention - the international commitment to macro-economic stability - is clear and this in itself ought over time to mean a radical change - for the better - in the environment for private sector business activity across the world. Acceptance of the aim of macro-economic stability has brought into sharper focus the structural, supply side, of the economy - that is the whole raft of influences that can affect the underlying growth rate of capacity and thus the growth rate of aggregate demand that can be sustained. In this context there is a strengthening international presumption in favour of open markets and free competition - both domestically and internationally - with a continuing strong presumption against predatory trade or exchange rate manipulation. The argument is that undistorted competition contributes to potential macro-economic growth through increased efficiency and the more effective allocation of productive resources. This in itself is somewhat remarkable, given that, at the micro-economic level, competition invariably constitutes a threat to established producers - and their employees - who may be tempted to make, often highly vocal, pleas for protection in one form or another to their national governments. Consumers, who benefit from competition, tend to make less noise. The threat of protectionism is never, therefore, far away. But in fact the presumption in favour of competition has proved encouragingly robust.

And it is true equally of government intervention in the form of regulation and social protection. But my strong impression is that there is a growing awareness in many countries that policies in all these areas need to take account of potential supply-side effects, with an increasing bias towards structural reforms, in labour, product and capital markets, with a view to increasing employment and reducing distortions that impede efficient resource allocation. Now I do not pretend to you, Mr. Chairman, that the international policy consensus that I describe - particularly on the supply-side - is fully articulated; nor do I claim that it is subscribed to in its detail equally in every IMF member country. But it does represent a substantial evolution in our collective thinking over the past decade or so towards a much more common approach to economic management, which serves as a valuable framework within which countries’ performance can be assessed. The snail may have moved slowly but it has in fact travelled a considerable distance! It has nonetheless still a long way to go. Its progress has been impeded in the past few years by the eruption of a number of financial disturbances - most recently in Asia - which have drawn attention to continuing deficiencies in our approach to economic management; and we spent much of the time last week in Washington discussing what lessons we might learn from those events.
William J McDonough: Update on the major initiative to revise the 1988 Capital Accord  Speech by Mr William J McDonough, President and Chief Executive Officer of the Federal Reserve Bank of New York, before the 4th Annual Supervision Conference of the British Bankers Association, held in London, on 19 June 2000. *  *  *  I am pleased to be with you to provide an update on the major initiative to revise the 1988 Capital Accord. Last June the Basel Committee on Banking Supervision, which I have the privilege of chairing, released a Consultative Paper proposing a new capital adequacy framework. My comments today will focus on the industry’s response to the proposal and the areas that will require the Committee’s attention going forward. Given the progress already achieved, it is my belief that the Committee will be prepared to release a second Consultative Paper early next year. I will also briefly discuss three essential aspects of the safe and sound operation of any banking organization - good corporate governance, rigorous internal controls and effective risk management. I will conclude with some thoughts on the critical role of banks’ board of directors and senior management. Current Accord The primary tool of capital regulation currently is the set of minimum ratios that were devised in 1988 by the Basel Committee. The 1988 Capital Accord has truly become a global standard for banks worldwide.

3.0  Institutional arrangement for debt management in Sierra Leone  Public debt management in Sierra Leone is governed mainly by the 1991 Constitution and the Loan Amendments Act of 1992 which vest the responsibility for contracting loans in the Ministry of Finance (MoF). However, the Ministry and Bank of Sierra Leone (BoSL) work closely in the execution of the debt management function, namely, loan negotiations, renegotiations, disbursement, amortizations and recording. While the MoF undertakes the policy function in terms of formulation of debt policies, strategies and implementation consistent with the macroeconomic and fiscal framework of the country, the BoSL maintains the database, prepares  2  BIS Review 79/2006  the foreign exchange cash flow budget, including debt service obligations. This framework has contributed significantly to improving debt management in the country. We will strive to improve on it. Indeed, the framework enhances coordination of the debt management function by the appropriate authorities. Ladies and Gentlemen, Like most developing countries, Sierra Leone has been facing a number of problems, particularly those relating to maintenance of quality debt data. These include inadequate resourcing of statistics generating units; low priority attached to data collection; and inefficient institutional arrangements for data collection, processing and dissemination. Others include gaps in data recording; and gaps in debt recording systems. I am glad to inform you that the present administration has moved consistently and decisively to up-scale general economic and financial data quality by strengthening data information flows both in BoSL and MoF and at the Central Office of Statistics.
As affirmed by the Governing Council at its last monetary policy meeting on 7 September, we expect the key ECB interest rates to remain at present levels for an extended period of time, and well past the horizon of the net asset purchases. Our asset purchase programme (APP), at the current monthly pace of € billion, is intended to run until the end of December this year, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. The net purchases are made alongside reinvestments of the principal payments from maturing securities purchased under the APP. Later this year we will decide on the calibration of our policy instruments beyond the end of 2017, taking into account the expected path of inflation and the financial conditions needed for a sustained return of inflation rates towards our objective. 1/3  BIS central bankers' speeches  The ECB’s monetary policy measures and the favourable effects they are having on borrowing conditions for firms and households, access to financing and credit flows across the euro area are supporting domestic demand and are also facilitating the deleveraging process. In order to reap the full benefits of our monetary policy measures, actions in other economic policy areas remain necessary to strengthen long-term growth and resilience in the euro area. Meanwhile, the condition and resilience of the euro area banking sector has continued to improve.

Eventually, they raised the credit rating of the Kingdom to advanced grades. This environment promoted the interest of foreign investors to participate in and benefit from the various investment opportunities available in the Saudi economy. The Saudi banking system has played a vital role in the enhancement of the national economy. Thanks to its use of the latest technologies and various banking products, the banking system has witnessed good development under a supervisory system which is very keen to meet domestic requirements and legislation and to comply with international standards, including Basel Capital Adequacy Standard. The banks operating in the Kingdom are very serious in the application of this standard. As a result, the Kingdom's banking system has become one of the advanced systems, not only at the regional level but also at the international one. Dear Audience, Basel II Standards are the most important supervisory initiatives of this decade, and they will have a considerable impact on changing the conduct of risk management at all banks regardless of their size and location. The Standards aim at achieving a number of objectives, including ensuring the capital adequacy of the banking sector to encounter any latent risks and the assessment of banks' risk management systems so that the supervisory authorities could ensure that they are appropriate, in line with the risks that banks might encounter, and up to the best banking practices in the area of effective banking supervision.
12  BIS central bankers’ speeches  Chart 5 Cross-border equity holdings (1980–2005) 1980  1985  1990  1995  2000  2005  Source: Kubelec and Sa (2010) and Bank calculations. Advanced economies  Emerging market economies  Financial centres (Hong Kong and Singapore)  Notes: Widths of links are proportional to the log dollar value of cross-border equity holdings. Each arrow denotes ownership, with the arrow pointing away from the holder of the equity and toward the issuer. Sizes of nodes are proportional to the log dollar value of the sum of all of the country’s cross-border equity holdings and liabilities issued (i.e. equal to the sum of incoming and outgoing links). BIS central bankers’ speeches  13  Chart 6 Country shares of world equity market capitalisation (1995–2010) 1995  2000  China  India  China  India  Other emerging G20  US  Other emerging G20  US  Other advanced G20  Non-G20  Other advanced G20  Non-G20  2005  2010  China  India  China  India  Other emerging G20  US  Other emerging G20  US  Non-G20  Other advanced G20  Non-G20  Other advanced G20  Source: Thomson Reuters Datastream. Note: “World equity market capitalisation” aggregates the US dollar measures of local equity market capitalisation. Chinese equity market capitalisation includes A, B and H shares. Russian equity market capitalisation not available prior to 1999. Data unavailable for Saudi Arabia.

European Central Bank: Press conference – introductory statement Introductory statement by Mr Jean-Claude Trichet, President of the European Central Bank, and Mr Vítor Constâncio, Vice-President of the European Central Bank, Frankfurt am Main, 10 June 2010. *  *  *  Ladies and gentlemen, Mr Constâncio, the new Vice-President of the ECB, and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting, which was also attended by Commissioner Rehn. Based on its regular economic and monetary analyses, the Governing Council decided to leave the key ECB interest rates unchanged. The current rates remain appropriate. Taking into account all the new information which has become available since our meeting on 6 May 2010, we continue to expect price developments to remain moderate over the policyrelevant medium-term horizon. Global inflationary pressures may persist, while domestic price pressures are expected to remain low. The latest information has also confirmed that the economic recovery in the euro area continued in the first half of 2010, but quarterly growth rates are likely to be rather uneven. Looking ahead, we expect the euro area economy to grow at a moderate pace, in an environment of continued tensions in some financial market segments and of unusually high uncertainty. Our monetary analysis confirms that inflationary pressures over the medium term remain contained, as suggested by weak money and credit growth.