samchain/econo-pairs-v1 huggingface dataset:
BIS central bankers’ speeches  7  that entails holding nominal GDP close to a given path over which nominal GDP increases by a certain percentage. The idea is roughly as follows. If nominal GDP falls below this intended path – which it did during the crisis – the central bank must compensate by stimulating the economy so that nominal GDP grows faster for a few years to get back onto the target path. So, bygones are not bygones in this way of thinking. Some of the increase in nominal GDP comes from higher inflation. If economic agents expect this type of compensating policy from the central bank, their inflation expectations will rise. Thus, the expected real interest rate will fall, which is an advantage in countries where the nominal interest rate has fallen as far as possible and where unorthodox monetary policy measures may not really work as well as we would wish. The introduction of a target for nominal GDP could in this way be seen as attempt to “kick start” the economy. As I have said today, it is not good to have a cocksure attitude. But I am nevertheless inclined to agree with those who are sceptical to the idea of replacing the inflation target with a target for nominal GDP.14 The fact that nominal GDP increases can be either due to real GDP increasing, to prices – measured using the GDP deflator – increasing, or to a combination of the two.

8  BIS central bankers’ speeches  been called.17 This type of “disappointment” regarding the shortcomings of monetary policy may also be due to the optimism regarding the abilities of monetary policy that I earlier implied may have followed in the wake of the Great Moderation. But inflation targeting may need to be modified But even if inflation targeting has not become obsolete and does not need replacing with something new, there may be cause to consider whether it should perhaps be modified, and likewise the tasks of the central banks in general. Many people think that this is the case.18 One relationship that became obvious in connection with the crisis was, as I have already noted, that financial stability was not something that automatically followed on from a policy aimed at keeping inflation low and stable. It also became clear that the central banks could find themselves in situations where the traditional instrument, the policy rate, could no longer be used, but where they must use new and so far untried methods to provide further stimulation. The conclusion that many people have drawn from this is that the central banks’ tasks should be modified and extended. In addition to the traditional monetary policy, they should more clearly have the task of trying to prevent financial imbalances from arising to avoid the sort of development we have seen in recent years.
We at the Bank of England showed one such measure, of ‘portfolio warming potential’, when we published the first full disclosure of the climate risks on our own balance sheet earlier this year.26 The measure, based on the provider’s emissions projections for each issuer with corporate bonds held in the Bank’s Asset Purchase Facility (APF), suggested that if those projections were representative of the emissions performance of corporates globally, the world would experience 3.5 degrees of warming by end-century (Chart 5). So far, so dramatic. But similar measures based on alternative forecast assumptions for the same portfolio suggested a much wider range of possible outcomes, from <1.75 to 4 degrees: a huge variation given the consequences of missing a 2 degree warming target (Chart 6). The problem stems in part from different assumptions about how the world will evolve and how different industries will need to react. For a given temperature goal, investors need to know how much carbon can be emitted, over what timeframe, and by whom, in order to assess where companies sit relative to their required trajectory.

We think that the inflation rate will reach its trough this quarter. For 2016, we expect average inflation of −0.5%. As you can see from the chart, inflation will move back into positive territory in early 2017. These forecasts assume that the three-month Libor remains at –0.75% over the entire forecast horizon, that the Brent crude oil price remains at USD 50 per barrel and that the Swiss franc weakens. Again, our forecasts show that the current period of negative inflation is temporary. Nevertheless, even temporarily negative inflation rates are undesirable. Yet they cannot always be avoided – especially during phases of strong exchange rate appreciation. What matters is that inflation expectations remain firmly anchored and that monetary policy is able to ensure medium-term price stability. Medium and long-term inflation expectations are still positive. This can be seen in various surveys of inflation expectations, and is confirmed by discussions between the SNB’s delegates for regional economic relations and company representatives from different sectors of the economy. Thus, we do not expect sustained negative inflation, let alone a deflationary spiral. Concluding remarks This brings me to the end of my speech. Earlier this year, the SNB took some far-reaching decisions: It discontinued the minimum exchange rate against the euro, and lowered the negative interest rate on sight deposits significantly into negative territory. These measures were necessary to promote adequate monetary conditions for the Swiss economy, and to ensure the SNB’s ability to provide medium-term price stability in the future.
It is easy to understand why lenders may find credit sensitive alternatives attractive in the short-term, but what is less clear is why non-financial borrowers who look to their financial service providers to help them manage their risks would want to see their cost of borrowing being driven by thin liquidity in CP and CD markets. And it is clear they don’t, in a survey of borrowers by the Alternative Reference Committee’s Nonfinancial Corporates Working Group in March this year, over 80% of respondents would prefer alternatives based on SOFR than on credit sensitive alternatives. [16] In fact if lenders looked past the short term benefits of substitutability they too would see that when  Descending safely: Life after Libor ‐ speech by Andrew Bailey | Bank of England  Page 5  the limited durability of these credit sensitive rates is combined with the need, and in some jurisdictions the requirement, to ensure there is access to robust fallbacks the sensible option is to make your primary rate selection the most robust you can. In the UK there is a clear consensus that credit sensitive rates are not required or wanted as part of sterling LIBOR transition and in my view this is sensible. Widespread use of RFRs will ensure we are using benchmarks that will remain transparent to users and embed rates that have long-term durability for the future. Conclusion The use of SOFR in US dollar markets is growing.

And while they may remove the reliance on expert judgement, they veneer over the fundamental challenges of thin and incomplete markets through the extrapolation of data. The ability of such rates to maintain representativeness through periods of stress remains a challenge to which we have not seen adequate answers. Developments in sterling markets So what is the position in sterling markets? Back in 2017, a reformed SONIA rate was recommended by the Working Group on Sterling Risk-Free Reference Rates (RFRWG) as the alternative risk-free reference rate to sterling  Descending safely: Life after Libor ‐ speech by Andrew Bailey | Bank of England  Page 2  Libor. This was in my view a good choice reflecting the liquid and active markets upon which it is based. This makes it inherently more robust. Since then, the RFRWG and UK authorities have co-operated on recommending a series of industry milestones to build liquidity in SONIA. These milestones have been positioned ahead of the cessation of sterling Libor at the end of this year. We don’t apologise for this – it is focussing attention, and providing a clear roadmap to support the development of deep and liquid markets in robust alternatives to Libor and facilitating a smooth transition. In line with the RFRWG milestones, alternatives to GBP Libor should have been offered to borrowers since the start of October last year.
Ivan Iskrov: Reflections on the past year Speech by Mr Ivan Iskrov, Governor of the Bulgarian National Bank, to the Association of Banks in Bulgaria on the occasion of the Banker’s Day, Sofia, 6 December 2010. *  *  *  Ladies and Gentlemen, It’s a great pleasure to be here this evening with you all, on 6th December, Saint Nicholas Day, and celebrate our professional holiday. Over the last eight years I and my colleagues from the BNB Governing Council, regardless of our numerous engagements, have not missed a single occasion to be with you and celebrate this great day. By this gesture we show our respect for and acknowledgement of the job well done by you in favour of the national economy. Commercial banks are not merely some of the many capitalist businesses focused on profit making for their shareholders. The banking system is a major part of the infrastructure of any market economy; it is its circulatory system. Without our daily committed work, our state would not be able to function properly. By tradition today we have the chance to pause and reflect on the past year and to share our hopes that in the year to come we would again successfully meet the new challenges. I have no doubts about that because we all have proved that we are capable of turning trials into useful experience, and experience into a means of completing the mission that society has assigned to us.

With the implementation of TARGET2 and BISERA7, banks and their customers have at their disposal a reliable and secure infrastructure for processing small and large payments in euro. This is a proper opportunity to invite any of you who, for one reason or another, have not yet availed of the advantages entailed in joining these two systems to do so. The most direct and broadest everyday contact of the general public with the banking system is through the banknote and coin related services provided to individuals and businesses. This year’s great event in this area was the commencement of operations of the BNB Cash Centre in Sofia. Our Cash Centre is one of the state-of-the-art facilities for storage and processing of banknotes and coins within the European System of Central Banks, meeting the highest requirements to security and convenience of the serviced banks and CIT companies. Through it the BNB has also met its obligations with regard to currency distribution and destruction of unfit currency. In its newly opened cash centre the BNB continues to provide to its customers standard currency-related services. However, this is the proper time to share with you that more and more often we receive at the BNB complaints by citizens that banks have refused to exchange damaged Bulgarian banknotes or that customers have received such banknotes in ATM cash withdrawal transactions. This necessitates the conclusion that banks do not strictly observe the BNB requirements to the quality of banknotes and coins.
Growth in household credit has been high for a long period, accompanying the sharp rise in house prices. The increase in housing wealth has amplified the demand for loans. The annual rise in house prices in Norway has been positive since 1992. In real terms, prices have almost trebled, making this the second longest period of rising real house prices since 1819. The rise in house prices accelerated through 2006, and the market showed signs of increased risk-taking and even a state of euphoria. 10  BIS Review 115/2007  Periods of sharply rising house prices have occurred previously. House prices have risen in many countries. Up to 2006 the US experienced the longest period of an uninterrupted rise in house prices. This period lasted for nine years, while the rise in house prices in Norway has lasted for 14 years. Furthermore, the total increase in real house prices in the US through the last period of expansion was far lower than in Norway. House prices have generally risen more in Norway than in the US in periods of expansion. BIS Review 115/2007  11  Developments in house prices reflect periods of expansion – often long – that are followed by a contraction. In periods when house prices have fallen in Norway, they have declined at a faster pace than during downturns in the US. It is only to be expected that fluctuations in Norway are much wider than in the US, with its many large local markets.

The question of whether borrowers should choose an adjustable or fixed borrowing rate – in order to be able to safeguard their own interests to a greater extent – became more relevant with the advent of credit market liberalisation in the 1980s. However, in almost the entire period since then, the nominal interest rate level has exhibited a falling tendency, first as a result of a decline in inflation expectations, then after 2000 due to a decline in real interest rates. Borrowers who chose a fixed-rate loan have therefore not benefited from falling interest rates during the fixed rate period. There are few success stories to be heard from borrowers who chose fixedrate loans. This will probably change ahead. The share of mortgages with a high loan-to-value ratio has increased in recent years, particularly among young borrowers. In addition, more households are choosing interest-only mortgages. The opportunity to postpone paying the principal can act as a buffer when servicing the debt becomes more demanding. For many households, this buffer has already been used. The increase in household borrowing has not been matched by a similar increase in investments in financial assets. The household saving ratio has been on the decline since 2002 and was very low, probably negative, in 2006. Household saving also seems to be negative this year. This means that in addition to financing housing investments by raising loans, borrowers are also financing some of their consumption – often a new car or boat – by increasing their (net) debt.
When wealth has risen, consumption also has done so. In the current decade, though, this relationship seems to have been weaker than in previous decades. The exact causes of this are not entirely clear. A number of hypotheses exist.1 One is that the sharp equity market decline that began in 2000 may have played a part. Households’ financial assets decreased substantially in value at that time. This may have prompted many households to have high saving in financial assets in order to rebuild their wealth. That in turn has countered the positive effect on consumption of rising house prices. Another hypothesis is that the weaker relationship between developments in wealth and consumption reflect the fact that labour market growth has been relatively weak despite comparatively high GDP growth. That may have given rise to greater uncertainty about future labour market conditions and future incomes, which may have induced households to have high precautionary saving. In the assessment we make in our main scenario, with a continued economic upturn, equity prices will continue to rise while the labour market situation will finally begin to improve in a more marked way. That is anticipated to induce households to scale back their saving and to cause a rise in the consumption ratio. At the same time, as I said earlier, we expect the rate of increase in house prices to gradually moderate as interest rate levels normalise.

Human resource development functions is integral to the talent management process and in supporting the human capital management strategy. Of equal importance is that this should occur at all levels in the organisation. In essence, the accountability for talent development requires concerted efforts throughout the organization and needs to be embedded as part of the working culture that is communicated, shared and understood at all levels. While the need for human capital development is apparent, what is less apparent are the appropriate methods and policies that should be adopted to advance human capital development. The financial services industry needs to identify the appropriate strategic direction for human capital development. Attention need to be given to the entry level, to the specialists and to the senior management levels. This would benefit from greater industryuniversity linkages which is a major channel through which the talent requirement and talent gap can be narrowed. The industry involvement in the curriculum design and delivery will ensure graduates are equipped with the relevant knowledge and skills that meet the requirements of the industry. Participation by the industry players may be in the reform of the academic curriculum and methodologies and in providing other forms of practical support to the institutions of higher learning. This will contribute directly towards meeting the human capital needs for the future. The quality of human capital is the cutting edge of competitiveness.
Alongside this, since 2019, the PRA and FCA have co-chaired the Climate Financial Risk Forum (CFRF) which has delivered a series of guides incorporating good practice ‘for industry, by industry’ which should enable firms to progress in response to the expectations in SS3/19. Where a proportionate approach is a firm’s preferred option due to lack of resources, the CFRF outputs should help to mitigate this issue. Update on regulatory reform It is worth noting that when carrying out its general functions (as opposed to taking individual supervisory decisions),5 the Financial Services and Markets Act requires the PRA to have regard to differences in the nature and objectives of different kinds of business organisation, including Mutuals. When making rules the PRA is required to consider and explain whether the rules would have a significantly different impact on Mutuals compared to non-Mutuals. This consideration is covered in our policy-making communications, including Consultation Papers and Policy Statements. The most significant package of policy consultation coming up – in 2022 – will be in relation to Solvency II. HM Treasury announced a review of Solvency II last year and the government has set three objectives for it: to protect policyholders and ensure the safety and soundness of firms, to support insurance firms to provide long-term capital to underpin growth, and to spur a vibrant, innovative and internationally competitive insurance sector. The package of policy changes will be designed to deliver on all three objectives.

The roots of insurance lie in those with mutual interests coming together to share risks, and mutuals continue to play a valuable part within the insurance sector. The pandemic has highlighted the risks of protection gaps and mutuals can play an important role in providing specialist cover and operating in markets under-served by other firms, such as sickness benefits or professional liability cover for those in unique occupations, from bus drivers to vets. Protection from risk, and a stable supply of such protection, is an essential service for individuals’ and companies’ security. It is also vital for the wider economy, and particularly important in supporting recovery from the impact of the pandemic. Both recovery from the pandemic and the transition to net zero will drive substantial restructuring of the economy, though, for example, change in working and travel patterns. This restructuring will lead to a decline in some existing sectors, and growth in others, the emergence of wholly new sectors. New or growing enterprises need certain insurance products to operate, and others to take away risk that they cannot efficiently bear themselves. Any protection gap slows investment and thereby impairs recovery and transition. Therefore the ability to eliminate any protection gaps is a clear opportunity for the insurance sector. Both the risks and opportunities from the post-pandemic recovery and the transition to net zero must be an important factor in determining your longer-term strategies.
In the euro-area, policy rates were also at all-time lows, but were expected to rise within 18 months or so. Six years on, US policy rates remain between 0–0.25%, while euro-area rates are 150 basis points lower. The first rise in US policy rates is still expected within a year, while the first rise in euro-area rates is now not expected for over four years (Chart 2). Chart 1: Date of first rate rises implied by forward market interest rates UK  Chart 2: Date of first rate rises implied by forward market interest rates 2018  2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009  UK  2017  US  2016  € area  2015 2014 2013 2012 2011 2010 2009 2009 2010 2011 2012 2013 2014 2015  Sources: Bloomberg and Bank calculations. Notes: The y axis shows the date at which the instantaneous forward OIS curve reaches 25bps above Bank Rate. 2009  2010  2011  2012  2013  2014  2015  Sources: Bloomberg and Bank calculations. Notes: The y axis shows the date at which the instantaneous forward OIS curve reaches 25bps above Bank Rate for the UK; the ECB main refinancing rate for the euro area; the top of the FOMC target range for the US. Looking beyond lift-off, the expected pace of interest rate ascent is also remarkably gradual by historical comparison.

0 2000  2003  2006  2009  2012  2015  2018  Sources: Bank of England/GfK NOP. Notes: The red dots show the adjusted inflation expectations at the one, two and five year horizons in the February 2015 Bank/GfK NOP household survey; grey lines show adjusted perceptions and expectations from previous vintages of the survey. Turning to financial market measures of inflation expectations, two-year ahead forward inflation rates have fallen by around 40bp over the past year and 5-year ahead expectations by the same amount. This appears to have been, to a degree, a global phenomenon, with forward inflation rates also falling in the US and euro-area (Chart 21). Chart 22 looks at the term structure of RPI inflation implied by inflation swap rates. Inflation is near the bottom of its distribution over the period 2009–2013. Financial markets appear to expect inflation to remain lower for longer than in the recent past. Because the period 2009– 2013 was associated with higher than target levels of inflation, financial market inflation expectations may still be broadly consistent with the Bank’s inflation target. BIS central bankers’ speeches  11  Chart 21: Changes in 5-year instantaneous forward inflation swap rates since March 2014 Percentage points  UK Euro-area US  Mar 2014  Sep 2014  Sources: Bloomberg and Bank Calculations.