samchain/econo-pairs-v1 huggingface dataset:
Moreover, some of the transitory effects entail a risk of higher inflation, if anything, during 1999; tax cuts and lower interest rates leave households with more money to spend and the same applies to cheaper oil. But underlying inflation also shows signs of being weaker than expected even though economic activity seems to be relatively strong and in line with the paths we have counted on for some time, with a further increase driven by domestic demand and supported by strong activity in Europe. The better picture of prices comes from a variety of factors. The rate of wage increases is likely to be somewhat more advantageous than we counted on earlier, even though we have consistently been cautiously optimistic in this respect. Of greater importance is productivity, where good growth in recent years has helped to brighten prospects. Somewhat lower import prices together with a slightly stronger exchange rate also contribute. Work on our next Inflation Report is nearing completion. There are several indications that in the two years horizon that is relevant for monetary policy, CPI inflation may be somewhat below our target. The picture of underlying inflation is much the same. Neither are these positive inflation prospects modified by the various risks that lie ahead. In a perspective that extends to the middle of 2000 the element of uncertainty is obviously high; if anything, however, the main risk seems to be that international activity will be marginally weaker and inflation accordingly somewhat lower. This is a pleasant situation to be in.

Thomas C Baxter, Jr and Sarah J Dahlgren: The Federal Reserve Bank of New York’s involvement with the American International Group (AIG) Joint written testimony before the Congressional Oversight Panel by Mr Thomas C Baxter, Jr, Executive Vice President and General Counsel, and Sarah J Dahlgren, Executive Vice President, of the Federal Reserve Bank of New York, Washington DC, 26 May 2010. *  *  *  Chair Warren and Members of the Panel, thank you for giving us the opportunity to testify here today regarding the Federal Reserve Bank of New York’s (New York Fed) involvement with AIG. I. The decision to lend to AIG  On the morning of September 16, 2008, it became clear to Federal Reserve and Treasury policymakers that AIG, then one of the world’s largest insurance and financial firms, was facing a potentially fatal liquidity crisis. AIG’s crisis was coming amidst the collapse of the housing market, within weeks of the receiverships of Fannie Mae and Freddie Mac, and within 24 hours of the bankruptcy of Lehman Brothers. Confidence in the financial system was exceptionally fragile, and financial firms were taking dramatic and unusual measures to protect their balance sheets. Money market funds, long viewed as a safe investment by millions of Americans, were experiencing massive withdrawals. The run on these funds, in turn, severely disrupted the commercial paper market, a vital source of funding for American businesses. Securitization markets started to seize up, especially those that relied upon instruments backed by consumer loans.
Intraregional trade now accounts for almost a quarter of the region’s total trade while intraregional investment activity has quadrupled to 17% of total investment since 2000. The vibrant SME sectors in the respective ASEAN economies have been an important part of this commendable economic progress. Indeed, going forward, the development and growth of ASEAN SMEs will have significant potential to contribute to the region’s prospects and become a key source for the future growth of the region. It is estimated that SMEs would account for between 20 to 50% of GDP across the ASEAN economies, constituting more than 96% of enterprises in the region, and contributing 50 to 80% of total employment. 1  International Monetary Fund World Economic Outlook (April 2015). BIS central bankers’ speeches  1  While SMEs continue to contribute significantly to domestic economic growth, intra-regional trade in ASEAN remains driven by large multi-national companies with the SME sector mainly having a supporting role in the regional production network. The next phase of the ASEAN economic integration process should therefore be focused on enhancing the role of SMEs in contributing towards greater cross-border economic activity. To realise this, policy initiatives are being geared to ensure that SMEs in our region will be plugged into the regional and global value chains. Leveraging on ASEAN’s growth prospects The recent drive for the greater economic and financial integration of ASEAN has paved the way for SMEs to expand and thrive.

ASEAN: A growth centre in the global economy ASEAN has emerged centre stage in the global economy and has been recognised as one of the most dynamic regions in the world. The region has sustained high economic growth with a long-term average GDP growth of 5.3%, higher than the global growth average of 3.6%. Currently, as a single entity, ASEAN is the 6th largest economy in the world with a GDP close to USD2.5 trillion. With a projected annual GDP growth of 5.4% 1 over the next six years, the region is poised to reach an economic size of USD3.7 trillion by 2020, four times the size it was a decade ago. The strong growth and dynamism of the region is supported by its favourable demographic structure. With a population of more than 630 million people and a burgeoning middle class, ASEAN is rapidly transforming into a thriving hub for consumer demand. By 2020, ASEAN is expected to account for more than USD2 trillion of additional consumption. This is being reinforced by rising incomes in the region, with per capita income almost trebling in this recent decade. The rapid progress of economic integration in ASEAN has enabled the region to harness the benefits arising from the diversity and complementarities that exist across the ASEAN economies. Amid the strengthening of cross-border supply chains in the region, intra-ASEAN trade and investment activity have increased significantly over these recent 15 years.
Recent crisis indicated that we all sail in the same waters and we may resist the waves, only if we confront these  2  BIS Review 30/2009  challenges together. Export is a generator of foreign currency flows needed so much for the currency stability, which is related to all other balances, financial system’s stability also included. Under these conditions, we should be aware that a joint action, of national importance, deeply patriotic for the values and future of the country is needed. Make the market more lively, more competitive and more innovative. Now the financial infrastructure is complete and it is up to you to use it more efficiently. It is the time to try to seek other balances in terms of foreign currency flows into the economy. Remittances have been important for a long time. They were the largest foreign currency serum in the economy. However, we should be aware that other indicators, such as exports and foreign direct investments will be prior items in the total foreign currency flows in the future. This should be realised by everyone and based on this ground, let us work together for the future. Dear participants, International initiatives are in the process. The Berlin meeting was extremely important in this regard. There was broadly discussed and converged into the idea that there is room for more coordinated actions, and protectionism is not the answer to the crisis. The London meeting will make new steps in this regard.

They helped to check the signs of panicky behaviour in the market and then to restore a more optimistic assessment of the future. At the same time, the process displayed some ability to heal itself. All this has contributed to a rapid recovery in the global economy as well as in Sweden. The current picture of many economies is thus very different from the uneasy situation that prevailed during 1998 and the early part of 1999. Global growth prospects are appreciably better and the risks connected with inflation have changed. That is also why instrumental rates were adjusted upwards by many central banks last autumn and early this year. In principle it can be said that inflationary pressure follows a cyclical pattern. When economic activity is strong, demand growth tends to exceed the expansion of capacity and this normally leads in time to an accelerating rate of price and wage increases. Conversely, weak demand may lead to the prospect of inflation being below the target one to two years ahead. As a rule, the repo rate should be raised in the former case and lowered in the latter. In this way, the repo rate varies with the business cycle so that the rate of inflation remains more or less continuously in line with the target. So, as rising economic activity successively reduces the degree of unutilised resources in the economy, the repo rate has to be increased. That is the process the Riksbank has initiated with the increases since last autumn.
The recent competitive environment has actually fostered the gradual transformation of banking activities, with a greater emphasis on the "originate and distribute" business model. With this model, credit institutions arrange financings but quickly offload a substantial portion of their risks, for example through securitisation, and take payment – much more so than in the past – in the form of fees and commissions. But although activity in new products such as LBOs is helping to boost French banks' revenues and earnings, it is also a source of vulnerability. First, in terms of remuneration, fierce competition among credit institutions is not only exerting downward pressure on margins; it is encouraging "covenant-lite" deals – a worrying trend. These complex transactions are also beginning to generate new risks. On this point, there is a tendency towards longer underwriting periods, during which banks bear the bulk of the risk. Banks should also pay attention to the fact that counterparties such as hedge funds are becoming increasingly involved in this type of deals. Allow me two brief asides, if you will. First, with regard to LBOs, let me refer you to the study appended to the Annual Report. On the topic of hedge funds, I would remind you that the Banque de France devoted a special issue of its financial stability review to this subject and that the Commission Bancaire pays close attention to banks' involvement with this type of counterparty.

Developments in the public sector were unexpectedly strong at the beginning of the year, which counteracted the fact that developments in the private sector were weaker than we had expected. The strained economic situation in the public sector indicates that employment there will develop weakly during 2004, while the economic upturn is still not expected to be reflected in any increase in the number of employees in the private sector. The fact that the labour market to some extent lags behind production development in the business sector is a normal part of the economic cycle, but developments in employment in the private sector have so far been slightly weaker than we had expected. Monetary policy can only marginally influence the weak labour market situation in the coming months. However, the situation in the labour market is a central factor in the assessment of demand and thus  2  BIS Review 7/2004  for long-term assessments of inflation. Labour market developments can influence future inflation in several different ways. If the demand for labour remains weak during a longer period and unemployment soars, there is a risk that this will have negative repercussions on household consumption and thus on demand. Households have become more pessimistic during the autumn, both with regard to unemployment and with regard to their private finances. So far we have seen no signs that household demand is about to slacken, but this was a factor we included in the risk assessment in the December Inflation Report.
While hubris may have set them up for a fall, it was the extraordinary events of August in global markets that appears to have tripped them. On August 17, the Russian government announced an effective devaluation of the ruble and declared a debt moratorium, shocking investor confidence all over the world. Over subsequent days and weeks, equity and debt markets the world over became increasingly volatile, BIS Review 78/1998  -2-  with US equity markets falling and the spreads between US Treasury securities and higheryielding debt instruments widening sharply. The correction of stock prices was not of exceptional size or concern and, indeed, had been anticipated by a number of astute market observers. However, the abrupt and simultaneous widening of credit spreads globally, for both corporate and emerging-market sovereign debt, was an extraordinary event beyond the expectations of investors and financial intermediaries. The unusual widening of credit spreads also caused significant losses at LongTerm Capital. As markets around the world moved in the same direction at the same time, the diversification on which Long-Term had previously relied failed them utterly. Instead of offsetting positions, their losses were compounded. At the same time, the volatility in equity markets caused further losses. On September 2, the partners of Long-Term Capital sent their investors a letter acknowledging 52 percent losses on the year through August 31 and that they were seeking an injection of capital to sustain the firm. The existence of this letter became widely known and reported within a few days.

There are several ways that the problems of Long-Term Capital could have been transmitted to cause more widespread financial troubles. Had Long-Term Capital been suddenly put into default, its counterparties would have immediately “closed-out” their positions. If counterparties would have been able to close-out their positions at existing market prices, losses, if any, would have been minimal. However, if many firms had rushed to close-out hundreds of billions of dollars in transactions simultaneously, they would have been unable to liquidate collateral or establish offsetting positions at the previously-existing prices. Markets would have moved sharply and losses would have been exaggerated. Several billion dollars of losses might have been experienced by some of Long-Term Capital’s more than 75 counterparties. These direct effects on Long-Term Capital’s counterparties were not our principal concern. While these losses would have been considerable, and would certainly have adversely affected the firms experiencing them, this was not, in itself, a sufficient reason for us to become involved. Two factors influenced our involvement. First, in the rush of Long-Term Capital’s counterparties to close-out their positions, other market participants - investors who had no dealings with Long-Term Capital - would have been affected as well. Second, as losses spread to other market participants and Long-Term Capital’s counterparties, this would lead to tremendous uncertainty about how far prices would move.
Compared with the assumption of an unchanged repo rate, market expectations normally provide a much more realistic forecast. But the assumption that the policy rate will develop in accordance with market expectations also entails some difficulties. Examples of problems include how one should measure market expectations and the communication of the interest rate path. It feels natural to move on from this now and go on to publish our own view of what would be a reasonable development for the repo rate. Basing the forecasts on the policy rate development expected according to the pricing in the financial markets was a major step towards greater openness and clarity. Now we are taking a further, but slightly smaller, step. There are several good reasons why we are now choosing to publish our own forecast for the development of the repo rate. The main one may be that we will have an even better tool for anchoring expectations. It will be easier to explain to the general public and the financial markets how we reason when making monetary policy decisions and how we see future interest rate developments. We will also avoid the communication problems that may arise if the central bank’s and the financial markets’ expectations of interest rate developments differ. But of course there are also potential problems. The forecast for the policy rate that we will present in connection with the inflation forecasts, is one we Executive Board members will make an assessment of together.

Jessica Chew Cheng Lian: Malaysian banking industry challenges and developments Speech by Ms Jessica Chew Cheng Lian, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Malaysian Association of Money Services Business Annual Dinner 2017, Kuala Lumpur, 29 April 2017. * * * It is my great pleasure to be here with you this evening at the annual dinner of the Malaysian Association of Money Services Business. I remember a time six or seven years ago when the Bank gathered the industry together at the auditorium in the headquarters of Bank Negara Malaysia to explain the new legislation that was being introduced for the industry. The industry then, and the industry today, is almost unrecognisable. You would have heard this said a few times now, and I think it keeps getting mentioned because the change has been so striking. Tonight, the industry will recognise companies that are leading the way in terms of exemplary customer service to the public, as judged independently by a global consulting firm. This is yet another reminder of how far the industry has come. In the last six years, the industry has almost doubled the value of money services transactions conducted through licensed MSB companies. We estimate that this included about 43% of worker remittances previously conducted through informal or illegal channels, that are now captured within the formal system. On average, MSB companies have increased their turnovers by more than 16%.
That's why I have said after each monetary policy meeting at which we have left interest rates unchanged that reducing the country's debt is another key condition for lowering inflation. Orderly finances are the road towards a good rating, towards credibility of the country as a whole and towards a strong koruna. Third policy for a strong koruna – long-term growth policy Monetary and fiscal policies endeavour to dampen fluctuations in the business cycle. In the last three years, they have been focused mainly on finding short-term solutions to the Covid and energy crises. However, we must not forget the third variable in the equation, which I would call long-term growth policy. The long-term growth of an economy depends on its production capacity, or on supply, that is, on people and their hard work and on the capital and technology in the economy. I want people to save so that capital is accumulated for investment. I want wage growth to be in line with growth in labour productivity.7 This will increase supply, the country's potential, and the economy will grow in a non-inflationary way. Above all, if there is less debt, the quantity of money in the economy won't grow too much. This is an important condition for reducing inflation. Ultimately, such an economy should attract foreign direct investment and its exports should thrive. The result will be a strong koruna. 1 Zeman, M. (2016). Speech at the Festival exportu 2016 conference, Czechinno,  Prague. 2 See https://www.cnb.cz/cs/verejnost/servis-pro-media/autorske-clanky-rozhovory-s-  predstaviteli-cnb/Covid-a-socialismus-nebezpecny-saci-reflex-naroda/ and https://www.

Professor Oldich Ddek and I described this precisely in an article called Tamers of cost-push inflation.4 It's also why we have set the monetary policy horizon at spring 2024 in the last two forecasts.5 If the central bank is credible enough, ceasing to increase rates before inflation turns around does not have to be a problem. However, everything needs to be properly explained. So, I argue that the CNB's interest rates are already at a level that is dampening economic activity. The short-term interest rate in the Czech Republic is now at its highest level since 1999. We have the tightest monetary policy in more than twenty years. Growth in the quantity of money in the economy is slowing considerably. M1 is falling by 6.3% year on year in nominal terms (September 2022), while the average for 2015– 2019 was growth of 9.3%. M2 is rising by 5.5% year on year in nominal terms (September 2022), while the average for 2015–2019 was 7.8%. If we deflate the monetary aggregates by the consumer price index, the monetary developments are already significantly restrictive for the economy. The year-on-year change in net new mortgages was -82% in September (-77% in August and -71% in July). The year-on-year change in net new loans to corporations was -64% (-40% in August and -70% in July). The demand-pull inflation pressures from the domestic economy are now moderating and household consumption is even falling in real terms. A policy of stable interest rates is therefore now the right one.
On the MPC, we are certainly not indifferent to the re-pricing of financial assets we have seen over the past few days. Indeed, we cannot be indifferent. For a small, open market economy like the UK, changes in asset prices have an important impact on macro developments though a variety of channels: via the cost of financing; via the cost of imports; and via their impact on both aggregate demand and aggregate supply. We need to factor the impact of asset price changes through all these channels into our overall assessment of the economic outlook and prospects for price developments. That forms the basis on which we formulate policy decisions to reach the 2% inflation target. This is the lens through which the MPC has viewed, and will view, recent market developments. Because I can assure you that the MPC has a very good understanding of both its mandate – to maintain price stability – and of its remit – to return inflation back to target. As I think – or at least hope – is widely recognised, the past year has proved to be a challenging time for monetary policy makers. And, to be frank, recent market developments have created their  Page 5  own, additional challenges. But, despite these challenges, the MPC’s commitment to achieving its target is unwavering.

There was over-investment in some sectors; much went into ambitious property development; and much went into financial assets, including short-term foreign currency claims, rather than into real assets. The hoped-for higher returns could not be maintained. Again with the benefit of hindsight, it is possible to identify a number of structural weaknesses in the mechanisms for financial resource allocation in the recipient countries. There was, for example, a general lack of reliable financial information, and a lack of transparency in relation to the financial position, of both public and private sectors. Complex and opaque links between government, financial institutions and non-financial companies made it difficult for outsiders to understand the real nature of their exposures. Financial markets were not well developed, leaving the system heavily dependent upon the banks. There was inadequate regulatory or supervisory oversight. BIS Review 49/1998  -2-  There was widespread, often informal, government influence over financial flows, which importantly also contributed to a perception that much of the borrowing was implicitly under-written by the government. The list could go on. The problem was compounded by the absence of any real perception of exchange rate risk. Borrowers were evidently confident that governments would maintain their exchange rate pegs against the dollar, even when the dollar itself began to strengthen, so that unhedged foreign currency debt, much of it at short-term, appeared to be a cheap alternative to domestic currency borrowing.