samchain/econo-pairs-v1 huggingface dataset:
9 [30]  The problems at Credit Suisse in March led to the takeover of the bank by UBS on the initiative of the authorities, with the help of a public guarantee and without using the resolution framework. In addition, the value of certain bonds – so-called AT1 instruments – was written down without shareholders having to bear all the losses first. This is the first time ever that a government has been forced to intervene in a bank defined as globally systemically important to avoid its failure. The measure taken by the Swiss authorities seems appropriate, but the fact that they chose not to use the resolution framework raises the question of whether the global standards for this framework need to be modified in some way. The handling of the AT1 instruments issued by Credit Suisse also raises the question of what role these instruments should play both in a bank failure and more generally in the capital adequacy framework. The resolution of banks in distress is a central part of the regulatory reform that came into place after the global financial crisis. But could it be that the framework is perceived as so complicated that it does not seem useful once the crisis occurs? Here there is every reason to have a continued global discussion about the present framework and how we can keep the benefits while making it more flexible and practical.

Perhaps the recent proposals of the European Commission could contribute.12 One aim is to make it easier for authorities to use the resolution tool for smaller banks as well. Among other things, the proposal means that the authorities should be able to actively use the funds in the deposit guarantee funds to facilitate the resolution. However, this proposal needs to be analysed in greater detail. The requirements on banks need to be strengthened The third question concerns the requirements we should impose on banks. There are several lessons here. Some may seem detailed, but they have a major impact on the banks' operations and the risks they take. Let me focus on three of these lessons. One lesson from the Silicon Valley Bank run is that deposits are not always as sticky as many people assumed. This is important for the liquidity rules banks must follow. After the 2008 financial crisis, the Basel Committee developed new global standards for this. As part of the Basel III agreement, countries were required to introduce two liquidity measures, the LCR and the NSFR. The LCR framework makes assumptions about how different types of liabilities flow out of a bank and how stable different forms of funding are. Deposits are normally assumed to be sticky. The question now arises whether the outflows assumed in the LCR framework are reasonable, given the outflows we saw in this case. I think we need to assume that deposits, especially unsecured deposits, are more unstable than we previously thought.
(iii)  The economic transformation process experienced after the 2001 crisis has enabled significant achievements in macroeconomic stabilization and helped reduce the “dollarization” effect created by unstable macroeconomic policies and high inflation in the past. Despite some deviations from this main tendency due to exogenous shocks and changes in risk perceptions, decisive implementation of economic program has always enabled a return to the main tendency. This process, combined with favorable developments in the balance of payments, has supported the increase in foreign exchange supply in the economy. (iv)  In this framework, in order to minimize the impact on supply and demand conditions in the foreign exchange market, the Central Bank, which follows a moderate reserve-raising policy, has conducted its FX buying via auctions, whose terms and conditions are announced with due notice, since 1 April 2002. Moreover, the Bank has announced annual auction programs since 2005 and does not make any amendments to these programs, unless extraordinary differences are observed in foreign exchange liquidity. (v)  Meanwhile, as also emphasized in all its press releases, the Central Bank will continue to closely monitor the volatility in exchange rates and may directly intervene in the markets in the event of excessive volatility that might occur in either direction. These volatility interventions are not only carried out by considering past data with a mechanical rule, but by evaluating all aspects of realized and potential volatilities.

(vii)  In case of an excessive increase in the liquidity surplus or the emerge of extraordinary fluctuations in the market even at reasonable levels of excess liquidity, to enhance the effectiveness and flexibility of monetary policy and liquidity management strategy, in addition to YTL deposit buying auctions with standard maturities, reverse repo auctions and Central Bank liquidity bills with maturity up to 91 days may also be used actively. As a matter of fact, technical procedures regarding the issue of the said bills were completed by the Central  BIS Review 1/2007  9  Bank, by “the Communiqué on Liquidity Bills” published in the Official Gazette, number 26310, dated 5th of October 2006. (viii)  Currently, depending on liquidity conditions, whether there will be standard one week or two weeks YTL deposit buying auctions will be held or not, if there will be an auction, the maximum amount to be drained through the auction is announced at 10.00 at Reuter’s CBTY page. In 2007, the Central Bank may hold New Turkish Lira deposit buying auctions with standard maturities of 1, 2 and 4 weeks and continue to announce the maturity and the maximum amount to be bought in the auction(s) on Reuters’ CBTY page. Starting from 2007 onwards, no announcement will be made on the said page on days when no auction is deemed necessary according to liquidity conditions.
The euro speaks clearly about Europe’s diversity through the architectural motifs of the euro banknotes as well as through the cultural symbols on the national sides of the euro coins. For Romania, as a euro area hopeful, thorough preparation in order to fulfil all criteria, with no exception, is crucial. As I stated before, it is important to define a target (horizon). Even if changed, the target must exist so that the commitment to implementing reforms does not wear off. The creation within the NBR of a committee for preparing euro adoption in February 2010, to whose meetings we have invited ever since October 2010 representatives of the Finance Ministry, is a solid proof for the fact that we care about are strongly interested in the future of our country within the euro zone. Nevertheless, it is of utmost importance to ensure coherent policies and a sustained reform pace to render our endeavour sustainable so as the euro adoption becomes certain as close as possible to 2015. Getting back to the Euro Exhibition, which has arrived in Bucharest shortly after Estonia, the 17th country to join the euro area, I want to underscore once again the ECB’s efforts to raise awareness of Romanians and other EU citizens about the single currency, as well as its history, role and symbols. From today until the end of May, Romanians have an opportunity to find out more about the currency we strive to adopt.

Moreover, the NBR Museum has on display valuable exhibits testifying to a “culture of money” dating back to ancient times in our region. The NBR Museum has made substantial efforts to raise awareness about the history of the national currency, the features of banknotes and coins, as well as the role of money in the economy. For instance, in 2005–2006, the National Bank of Romania conducted an extensive communication campaign on the leu’s redenomination, and in view of the prime function of a central bank, namely currency issue, keeps the public informed about the leu’s security features. At the same time, apart from these efforts, our central bank often includes among its strivings to increase financial education, themes related to the history of the  BIS central bankers’ speeches  1  European single currency. It is only natural that Romanians be well aware of the currency of the club that we aim to be part of. Keeping the public informed is an ongoing process, prepared and unfolded long before Romania’s euro adoption. This is why we appreciate and support the ECB’s effort to showcase this travelling exhibition to the EU Member States to the benefit of all European citizens. I therefore totally agree with Mr. Jean-Claude Trichet, the ECB’s President, who said precisely one year ago (on 10 March 2010, when this exhibition was inaugurated in Frankfurt) that “the euro should speak both of Europe’s diversity and its common culture, its history and its future”.
Enhancing the framework set out in the Medium Term Program (MTP) through further structural adjustments to strengthen fiscal discipline will support the relative improvement of Turkey’s sovereign risk. Should the goals set out in the MTP are achieved we consider that it may be possible to keep policy rates in single digits throughout the forecast horizon. Increasing budget deficits worldwide continue to pose upside risks to inflation expectations and thus to global market interest rates in the long term. Our medium-term inflation and monetary policy outlook envisage that recovery in global economic activity follows a slow and protracted course, while saving rates keep rising and global interest rates remain at low levels for an extended period. However, huge budget deficits particularly in developed countries, which are triggered by fiscal stimulus packages adopted in the face of the global financial crisis, besides the lack of a clear exit strategy from these policies, create upside risks regarding medium-term global interest rates. Countries with relatively sounder banking systems and prudent fiscal policies would be more resilient against these risks. In this context, I would like to once more underline the significance of fiscal discipline in the current conjuncture. The course of oil and other commodity prices still constitutes another important risk. Shortterm ample liquidity driven by countercyclical policies on a global scale exposes not only the emerging market currencies, but also commodity prices to speculative actions. Therefore, oil and other commodity price developments warrant caution, even in a scenario of a gradual global economic recovery.

Thus, we cannot work a monetary miracle, either legally or, above all, from a “fiduciary” perspective: any suspicion of fiscal dominance would lead to monetary mistrust, to a loss of confidence in the value of money, as observed in the past and, more recently, in certain emerging market economies. Let us be clear on this: the sharp rise in public debt is clearly the buffer mechanism that the 2/5  BIS central bankers' speeches  economy needs in the current circumstances. But it will have to be paid back in the long term and this will mean adopting a more effective management of public spending in the medium term. The central bank’s actions are conditioned by its price stability target and not by the fiscal needs of its individual member countries. To call this into question would be to jeopardise public confidence in the currency, which is one of the essential assets for guaranteeing economic prosperity. Likewise, undermining the independence of the central bank would be to diminish its power and its agility, which are precisely the strengths that protect our economy during a crisis. This is why I am placing so much emphasis on these two anchors. It is not through a somewhat rigid sense of conservatism, as suggested by a slightly lazy cliché. In the current low-inflation environment, our mandate in no way prevents us from innovating, acting, supporting the economy rapidly and powerfully. Indeed, it even creates the conditions for legitimate and efficient action.
6 Second, the “twin engines” view draws too absolute a line between banks and non-bank financial intermediaries. Alongside other asset managers, banks have been material investors in securitised credit. In some respects, it may be more useful to distinguish  4  See Churm R., and L. Webber (2007), “Decomposing corporate bond spreads”, Bank of England Quarterly Bulletin, Q4 2007 (forthcoming). 5  Alan Greenspan made this point a few times. 6  For example see Tucker P M W (2007), “A perspective on recent monetary and financial system developments”, speech at Merrill Lynch Conference on Hedge Funds, Bank of England Quarterly Bulletin, Q3 2007, pp 310-16. BIS Review 149/2007  3  between intermediaries on the basis of whether they undertake some combination of maturity transformation, leveraging their balance sheets, and mark-to-market valuations. Banks are not alone in having these characteristics, and so there can be common shocks to bank and non-bank investors. In a recent series of papers, 7 Hyun Shin has argued that balance sheet management of this kind amplifies the credit cycle. That sounds like the “financial accelerator” model, except that Shin’s position is that the outcomes can exceed those warranted by fundamentals. His argument is that in the upswing of a business cycle, the rise in asset values increases the accounting net worth of banks and other intermediaries, enabling them to leverage up their balance sheets. This expands credit; and increases the liquidity in capital markets, reducing liquidity premia embodied in asset prices; and so on.

B., and M. Campello (2002), “Borrowers' financial constraints and the transmission of monetary policy: evidence from financial conglomerates”, Federal Reserve Bank of New York, Staff Reports: 153. BIS Review 149/2007  5  The fourth element in the story, underway since August, has been distributional. Banks relatively reliant on wholesale funding have bid up for funds. But doing so has been taken as an adverse signal, prompting further rationing of wholesale money market lending at term maturities and potentially deterring the strong from entering the market; this is what is known as a “Lemons” problem 13 . In the United Kingdom, since August, mortgage approvals and secured lending have declined by more at the medium-sized mortgage banks and specialist lenders than at the largest UK banks, partly due to Northern Rock (Charts 14-15). This was symmetric. Their mortgage portfolios grew faster over the previous years. All told, this looks like a manifestation of the Kashyap and Stein finding, in various non-UK settings, that lending is more cyclically variable at banks that start off with weaker balance sheets; 14 or, as I would prefer to put it, with concentrated income streams and/or funding sources. Won’t the macroeconomic effect of this be dampened by the bigger and more diversified banks picking up the slack? It is important to distinguish the longer term from the near term. The longer-term impact will depend on whether the structure of the industry shifts. The securitisation boom seems to have altered the terms of trade in UK banking for a while.
The central bank sets the interest rate, and in all of these countries monetary policy is currently based on the understanding that in the long-term there is no trade-off between inflation and employment. This applies regardless of whether they have introduced inflation targeting or not. Among the countries with positive economic developments in the last ten to fifteen years, different degrees of confidence in the nominal anchor early in the 1990s have probably been decisive for the choice of inflation targeting as a monetary policy regime. When confidence was lacking, it was costly to reduce inflation. For many countries it was important to establish a system that could build confidence. Inflation targeting is tailor-made for this purpose. It is possible that the disturbances in the world economy were particularly large in the 1970s and 1980s, and that later it has been easier to stabilise inflation and output.8 In the 1970s and early 1980s, oil prices rose sharply. We have not had similar disturbances in the last fifteen years. On the other hand, monetary policy is probably more robust now. Disturbances are not allowed to spread in the same way as earlier. Many countries have been exposed to major disturbances in the last fifteen years as well. 7  Consensus Forecasts Inc. provides an overview of different institutions’ inflation forecasts for different countries. This may be a measure of inflation expectations.

This brings me to the other big uncertainty: how far will tighter credit conditions affect the wider economy – in the UK and the rest of Europe as well as in North America? It seems highly likely that growth was supported by easier credit over last few years. But to what extent? When it comes to quantifying the effect of changes in credit conditions, our workhorse economic models still cannot help us very much. As far as the UK economic outlook goes, our central judgement is that financial stress will act as a significant drag on demand over the next two years. But there is a high level of uncertainty about this; and, as we now see it, the risks, as they affect output, are tilted to the downside. These are two fold: first, that the financial crisis will persist and possibly intensify; and second, that over time tighter credit conditions and asset price weakness will combine, and in the worst case feed off each other, to sap the strength of overall demand, and put downward pressure on inflation in the medium term. Higher costs Let me come now to the other major area of risk: the upward pressure on inflation from higher external costs. The most recent build up of global cost pressures is just the latest episode in a remarkable period of soaring commodity prices. Oil prices have more than trebled since the start of 2004, and metals and food prices have more than doubled.
Chile’s institutionality assigns the Central Bank two main functions: to safeguard the stability of prices and the stability of the payment system, understood as financial stability. The first of these objectives has been specified under the regime of flexible inflation targeting, and has governed us for over 15 years, setting the target that annual expected CPI inflation must stand at 3% in a two-year horizon. This regime also considers a floating exchange rate, where the Bank reserves the possibility of intervening in the market, a power it has exercised barely four times since this policy came into effect in 1999. This should clarify what lies beyond the objectives of our Monetary Policy: on the one hand, under the foreign exchange policy I have just described, we do not have a target for the exchange rate. We allow it to settle freely in the market responding to local interest rates and its other macroeconomic determinants. This is relevant because, as the empirical evidence shows, in small, open economies the exchange rate is an important shock absorbing mechanism. Second, our target is not short-term inflation, but longer-term inflation. Thus, to the extent that inflation fluctuations are perceived as transient, they should not have much impact on our policy decisions. A good example of this is the steep increase in inflation we had between 2014 and 2016. This process originated largely in a shock to the exchange rate that had transitory effects on inflation.

Recent years’ relentless downward revisions to growth prospects have permeated companies’ desired level of inventories and part of what we see in the 2017 growth outlook is also related to that. For 2018, the baseline scenario assumes that the economy will perform better than this year, growing in the 2.25% to 3.25% range. This will allow the activity gap to narrow steadily throughout next year, keeping in mind that the Board still estimates our economy’s potential growth rate between 2.5% and 3%, and trend growth at 3.2%. These projections assume that, after a three-year-long fall, gross fixed capital formation (GFCF) will post a slightly positive growth in 2017 and a clearly stronger expansion in 2018. This result will be decisively influenced by higher investment in non-mining and non-housing investment (mainly machinery and equipment). This, because the former is expected to regain its positive numbers during 2018 and the latter to continue to adjust for a few more quarters, after the boom triggered by amendments to VAT payment regulations in the sector. As a percentage of GDP, in 2017 GFCF will reach 21.7% and 22.5% in real and nominal terms, respectively. On the consumption side, no major changes are expected in annual growth, and it is foreseen that it will continue to sustain domestic output and expenditure. Our baseline scenario assumes that consumption will grow at a pace of 2.5% and 3% this and next year, quite like 2016.
While we have seen some easing in the past couple of months as the impact of past energy price rises starts to recede, UK CPI inflation is still in double digits. That is unacceptably high. In line with its mandate, the MPC has taken action to bring inflation back to the 2% target on a sustainable basis. Over the past 18 months since I joined the MPC: we have raised Bank Rate by almost 400 basis points; we have halted asset purchases and started to run down the portfolio of assets held as a result of quantitative easing (QE); and we have changed the character of our communication about the economic outlook and its implications for policy. Taken all together, this represents a significant tightening of the monetary policy stance, commensurate to the significant challenges to price stability we have been and are facing. These challenges come from recent rises in European wholesale energy prices; from disruptions to global supply chains; from the strength of corporate pricing power; and from tightness in the UK labour market. All of these challenges continue to threaten or linger. The MPC has done a lot to address these challenges. But has it done enough? Famously, monetary policy works with ‘long and variable lags’. [1] As a result, much of the policy  Page 3  tightening announced by the MPC over the past year still has to work its way through to the economy in general, and to price developments in particular.

Page 1  Inflation is a ‘wicked problem’ − speech by Huw Pill Introductory remarks given at the Warwick Think Tank, Warwick University  Page 2  Published on 16 February 2023  Speech Good evening everyone. It is a great pleasure to be here at the Warwick Think Tank today. Thanks to the organisers for the invitation to participate. I am sure that you have many questions about the outlook for the UK economy. We all do. I am looking forward to discussing those in a moment. But before we turn to that discussion, I thought I would kick-off with a few remarks about the framework within which monetary policy works. The first thing to say is that the objective of monetary policy in the UK is very clear. The Bank of England’s Monetary Policy Committee (MPC) has the objective of price stability. Through achieving price stability, monetary policy creates an environment in which firms and households can make the longer-term plans and investment decisions that generate the innovation, dynamism and productivity that ultimately drive growth and prosperity. Price stability has been operationalised in the form of an inflation target of 2% for the consumer price index (CPI). This target holds at all times. The MPC therefore needs to achieve this target on a sustainable basis: it is not a target for one moment or horizon, but must be achieved on an ongoing basis over the medium term.