samchain/econo-pairs-v1 huggingface dataset:
I think it’s hard to predict which of these is more likely. Some remarks about wage growth and unemployment: don’t forget productivity  One consequence of being uncertain about supply growth, for a monetary policy maker, is that you begin to rely somewhat less on indicators of economic growth – it’s no longer so clear what constitutes a “strong” or a “weak” GDP print, relative to underlying productivity – and instead put more weight on direct measures of spare capacity, such as unemployment. However, that’s advisable only to the extent you trust the link between unemployment and wage growth. In recent years, many seem to have lost that trust. According to the “Phillips curve”, low unemployment is meant to push up wage growth. Yet here we are with unemployment at a four-decade low and wages still growing at a rate well below the historical average. As a result, several commentators have questioned the MPC’s central prediction that wage growth will rise next year. Some have gone further and pronounced the death of the Phillips curve. 12  All speeches are available online at www.bankofengland.co.uk/speeches  12  There are always risks to any forecast. But the latter claim, at least, is premature. Using annual data, Chart 10 plots UK wage growth, less expected inflation, against the rate of unemployment – the UK’s Phillips curve. The blue dots cover the first twenty years of inflation targeting, till 2012, the red dots the five years since.

The MPC explained over a year ago that there were “limits to the extent to which above-target inflation [could] be tolerated” and that those limits depended on the degree of spare capacity in the economy. In March, eight months ago, it said in its Monetary Policy Summary that, if demand growth remained resilient, “monetary policy may need to be tightened sooner” than the market expected. Similar points were made in the intervening months. Yet, even as inflation rose, and the rate of unemployment fell further, interest-rate markets continued to under-weight the possibility that Bank Rate might actually go up this year. Chart 1 plots the cumulative change in the three-year sterling interest rate, over the past year or so, against what  Chart 1: Interest-rate markets relatively unresponsive  you might have expected to happen (based  to upside surprises in economic data through 2017  1  on historic correlations) given the pattern of data surprises. There is always room for judgement about any individual interest-rate decision and not everyone on the Committee agreed with this one. After a long period of weak wage growth there’s certainly room for doubt, or at least caution, about the inflationary impact of lower unemployment. (For my part I think  Sources: Bloomberg, Tradeweb, and Bank calculations. the evidence is still consistent with such an inflationary effect and I will say something about this later on.) 1  Cumulative changes in UK 3-year nominal spot rates.
Presentation in Vienna). 4  BIS central bankers’ speeches  Secondly, we should bear in mind that a country-specific difference in banking regulation is nothing new. Even before the financial crisis began in 2007, both the Swiss big banks were subject to stricter regulations in terms of capital requirements than their competitors in many other countries. As already mentioned, FINMA ruled, in autumn 2008, that as of 2013, both big banks will have to hold double the amount of capital specified in international minimum standards. The current “Swiss finish” therefore calls for an extra 100%! However, these regulatory differences do not seem to have harmed the Swiss financial centre in the past. On the contrary, Switzerland’s banks have always had a tradition of a “Swiss finish”. Stability is one of the Swiss financial centre’s clear competitive advantages and has made a significant contribution to attracting customer assets and companies to Switzerland. A consideration of regulatory differences in their entirety Let us now take a closer look at the possible regulatory differences in connection with current trends in Switzerland and other countries. How significant are these differences? First of all: the thrust of international capital regulation is the same everywhere – more capital, stricter risk weighting and systemic importance to be taken into account when deciding how rigorous the regulation should be.

You gave your time freely and shared your ideas selflessly. Thank you. We are also indebted to our partners and trainers who have contributed on a pro-bono basis to IBF’s learning resources – working on impossible timelines to deliver high-quality training standards and study guide materials. There is a final group that I want to acknowledge, the unsung heroes of the IBF story – the past and present staff of IBF. •  From administering the CMFAS examinations to developing new industry examinations;  •  from reviewing and accrediting training programmes to certifying individuals under FICS;  •  the management and staff of IBF have been unrelenting in their commitment to raising industry standards. As we look back at IBF’s 40 years, we can take pride in what it has achieved. •  Some 200,000 participants have benefitted to-date from training courses offered or accredited by IBF. •  Close to 2,000 practitioners have been certified under the FICS Standards. One of the reasons why IBF has done well is that it has renewed itself periodically, to stay relevant and effective amidst a changing environment but always focused on its core mandate of promoting competency in finance. Today, IBF embarks on the next phase of its journey to raise industry standards. Our new mission is to “empower practitioners with capabilities for a robust Asian financial industry”. To equip our finance professionals for the next phase in Singapore’s development as a financial centre, IBF will focus on two new dimensions.
First, we did our routine work in the money markets of lending to the banking system against high quality collateral, such as government debt, and at Bank Rate set each month by the Monetary Policy Committee. After some initial volatility, we achieved our primary objective in the money markets of bringing interest rates on overnight borrowing into line with Bank Rate. And over the past two months as a whole, overnight interest rates have, on average, been as close to Bank Rate in the UK as in the euro area and closer than in the US. We were, however, pressed to do more than our routine job and to lend in exchange for other collateral, including the financial assets for which the markets had virtually closed. Banks, in particular, said they wanted us to help them turn illiquid assets into cash. As I told the House of Commons Treasury Committee on 20 September, we were cautious about doing this. The case for caution is, in the jargon, moral hazard. Put simply, such action by us encourages the very risk-taking that caused the present problems. It is crucial that, in making their lending and borrowing decisions, banks face the right incentives. That is why we did offer to lend in exchange for illiquid assets but only at a penalty rate of interest. Support on the scale required by Northern Rock would have been difficult to undertake without it becoming “stigmatised” – regardless of the method adopted.

The Maastricht Treaty, by removing national currencies and defining budgetary rules, leads to an important transfer of power from national capitals to European institutions. The French franc, the Italian lira, and the German mark were all symbols of national identity. The euro is now playing an integrating role in people’s minds. In this regard too, the new currency brings a revolutionary dimension. Remember that national currencies were almost always and everywhere brought about by fundamental political changes: the French franc was the “franc Germinal”, the Italian lira was created on the occasion of the Italian unification, and the Reichsmark appeared in 1873 at the foundation of the German empire. These are very strong political symbols indeed. For Switzerland too, the introduction of the euro was a kind of revolution. For the first time in our history, our country was completely surrounded by a single currency area. In terms of population, Switzerland, with its 7 million inhabitants, could be compared to Missouri in the middle of the United States. Just try to imagine Missouri with its own currency! It would not be very realistic. Until 1999, Switzerland had been living amidst very diverse European currencies. In fact, our country had always lamented about this situation. Indeed, given our large export sector, we could only dream of a stable monetary environment without exchange rate fluctuations, which always interfere with economic decisions and distort price comparisons. A common view should be corrected here, that of Switzerland somehow benefiting from external monetary disorders.
For example, in the aftermath of the crisis in Europe, when the European banks were shrinking their balance sheets and pulling back from their overseas lending, concerns were raised about the fact that the European banks in Malaysia had claims of $ billion on Malaysians, which was equivalent to about 23% of Malaysia’s GDP then. These concerns focused on the impact of a pullback by European Banks on capital flows and the availability of financing to Malaysian companies. What ultimately helped us to alleviate those concerns was the fact that two-thirds of these claims were held by locally incorporated subsidiaries of European banks. Incidences like this not only highlight the fact that being part of the global financial system brings risks of contagion, but it also points to the fact that having prudent policies – in this case, requiring foreign banks to be locally incorporated – can help to mitigate some of these risks. I will have more to say on risk mitigation a little later. The second way that the financial contagion can spread to the domestic economy is through capital flows into domestic asset markets. These create asset bubbles and if the central bank doesn’t intervene, the twin attraction of rising asset prices and an appreciating exchange rate can be an irresistible draw for foreign portfolio funds. If not well-managed, such inflows can create imbalances in the economy and financial system, which will eventually manifest themselves, usually when the flows reverse.

Second, regional policymakers are still trying to trying to make the cultural change whereby we are comfortable with both hearing about potential vulnerabilities in our economies and being comfortable in expressing concerns about vulnerabilities that may exist in our regional neighbours. That is a cultural change but it is a necessary change if regional surveillance and defence mechanisms are to be truly effective. Of course, it is must be remembered that, regional or international, such mechanisms are a supplement and not a replacement for national resilience. What the future holds? The state of the global economic and financial system It is indeed the case that after almost seven years of ups and downs, there continues to be plenty of uncertainty. Therefore, let me just say that we have been going through very stormy weather for the last seven years, and now we see some of the dark clouds parting and the sun shining through. Does it mean the storm is over? I cannot say. It is still the case that reading a financial newspaper on Friday can sometimes give a different picture of the global economy from what was reported on Monday. Many macroeconomic statistics continue to be volatile or show weak trends. On the other hand, many financial statistics, while also being volatile, have shown very strong trends. BIS central bankers’ speeches  7  After seven years of very aggressive monetary policy, we continue to face a world of weak growth. There has been much discussion of the new normal.
Percent 8  80  6  60  4  40  2  20  0  0  2020Q1  2021Q1  2022Q1  2023Q1  2024Q1  Imported goods Domestically produced goods and services Energy products (rhs)  2025Q1  Sources: Statistics Norway and Norges Bank  And even if Norges Bank cannot influence global prices in foreign currency terms, we can influence the exchange rate. A higher interest rate normally leads to a stronger krone exchange rate and weaker imported price inflation. Inflation does not come down on its own. The chart shows our forecasts from December (Chart 8). We expect energy prices to fall further out and imported inflation to ease, thereby curbing consumer price inflation ahead. Domestic inflation is likely to remain elevated for longer. The labour market is still tight, and business costs have increased. The effects of this will persist for a while and will contribute to propping up inflation. Had we not raised the policy rate, we would have run the risk that households and firms had started planning for high inflation in price and wage setting. In that case, it could have been necessary to tighten even more at a later stage to bring down inflation, which we want to avoid. The policy rate is being set with the aim of bringing inflation down towards the target of 2 percent. We could have raised the policy rate higher and faster than we have so far. Inflation might then have come down faster.

As I see it, expected corporate profits and access to reasonable investment financing are vital for a process of transformation. Wage formation Let us now take a look at a period when wage formation was one factor behind a less successful transformation of the Swedish economy. When the industrialised economies began to recover after World War Two and international competition increased, partly because trade barriers were dismantled, it became increasingly necessary for Swedish firms to adjust their product range. The requirements resembled those that now seem to lie in the not too distant future. For much of that period the level of Swedish wage costs rose rapidly. This meant that corporate profitability was under pressure both from the increased international competition and for rising wage costs. To cope with this pressure, firms tried to cut production costs by means of rationalisation rather than by investing in new products. With diminishing profits, they lacked the new investment stimulus and the rapid renewal of the capital stock that the pressure for change called for. During a period of transformation, rationalisation is not enough; new developments are equally important. At first, most things still went well. The 1960s was a fantastic decade for growth. In time, however, the strategy proved to be defensive and stagnation set in in the 1970s. There are limits to growth through rationalisation. Without renewal, growth normally slows sooner or later. Compared with other countries, the trend rate of growth in Sweden did indeed turn downwards.
At the same time, unlike in most jurisdictions, we have already had for more than a year very advanced legislation on resolution that has been applied in the process of restructuring our financial system and that has entailed a significant saving of public funds. That said, it is true that some specific aspects (especially associated with the deductions introduced for regulatory capital) could be specially demanding for certain Spanish banks,  BIS central bankers’ speeches  5  which are already responding in their strategic plans. More generally, the pressure exerted by the market on the availability of capital (beyond the new minimum regulatory requirements) requires an on-going effort to preserve capital and, specifically, to maintain prudent cost containment and dividend policies. Also, it is clear that the productive specialisation of our economy and its dependence on bank financing make it vulnerable to any adverse impact of the new regulation on the ability of banks to finance the real economy. To counter this, all we can do is take advantage of the timetables established to ensure our institutions gradually adapt to the new requirements and, above all, work at the same time to promote the development of our capital markets in order to increase their capacity to intermediate the economy’s financial flows. All told – and I will finish here – the main challenge we face, as I have already mentioned, is the persistent fragmentation of European markets (despite the recent improvement) and the consequent link between sovereign risk and banking risk.

That requires striking a suitable balance between measures to minimise the probability of the bankruptcy of systemic institutions – by imposing supplementary capital buffers – and, in the case of more complex institutions, the design of contingency action plans which ensure orderly resolution if a state of non-viability is reached. This is, in essence, the content of the work undertaken recently by the Financial Stability Board. In any event, the essential ingredient of orderly bank resolution schemes is the specification of a bail-in arrangement establishing a clear order of priority for the claims of shareholders and the various types of creditors that can be activated before insolvency proceedings are commenced and before any State aid is made available. The credibility of this framework will favour the appropriate perception of the risk effectively entailed by each liability instrument and will minimise the bill to be borne by taxpayers to prevent the disorderly winding-up of banks. In the European arena, we have progressed greatly in the definition of a regulatory framework for the resolution of non-viable banks. There is already political agreement on a proposed Recovery and Resolution Directive which will establish a clear burden-sharing system for insolvent banks and thus minimise the possible cost of rescue for taxpayers. BIS central bankers’ speeches  3  This Directive is also a first step in the creation of a single resolution mechanism to supplement the nascent single supervisory mechanism which will enable a real banking union to be set up in Europe.
BIS central bankers’ speeches  7  driven by the housing market, seen in the 10 year upswing of the last cycle. Trees cannot in the end grow to the sky. The debt stock of course tends to change relatively slowly. Credit is growing broadly in line with GDP. If it were to resume growing more than twice as fast as GDP, it could take a number of years for debt to income to retain its pre-crisis peak. But just as financial cycles build up over a number of years, the risks they pose are perhaps best managed over time. Given the vulnerability that already exists and the powerful drivers in the UK, particularly the housing market, if credit began again to grow faster than GDP, I would want to think about action to manage the financial stability risks sooner rather than later. References Aikman, D., Haldane, A. G. and Nelson, B. D. (2015), Curbing the Credit Cycle. The Economic Journal, 125: 1072–1109. doi: 10.1111/ecoj.12113. Arcand, J-L, Berkes, E and Panizza, U (2012), “Too much finance?”, IMF Working Paper No. 12/161. Borio, C (2012), “The financial cycle and macroeconomics: What have we learnt?”, BIS Working Paper No 395, December. Cecchetti, S, G, Mohanty, M, S, Zampolli, F (2011), “The real effects of debt”, BIS Working Paper No 352, September. Crowe, C., Dell’Ariccia, G., Igan, D., and Rabanal, P., (2011) “How to Deal with Real Estate Booms: Lessons from Country Experiences”, IMF Working Paper, WP/11/91.

Cunliffe, J, (2015) “Macroprudential policy: from Tiberius to Crockett and beyond”, Bank of England, speech given at TheCityUK, London. Drehmann, M, Borio, C and Tsatsaronis, K (2012), “Characterising the financial cycle: don’t lose sight of the medium term”, BIS Working Paper No 380, June. Hills, S, Thomas, R and Dimsdale, N (2010) The UK Recession in Context – What Do Three Centuries of Data Tell Us?, Bank of England Quarterly Bulletin, Q4. Jorda, Ò, Schularick, M., and Tayler, A, M., (2015) “Leveraged bubbles”, Federal Reserve Bank of San Fancisco Working Paper Series, 2015–10. Mcleay, M, and Thomas, R, (2016) “UK broad money growth in the long expansion 1992– 2007: what can it tell us about the role of money ?”, forthcoming in: in Chadha, J, Chrystal, A, Pearlman, J, Smith, P, and Wright S (2016) eds., The Long Expansion in the UK: causes and consequences”, Cambridge University Press. Mian, A, R., Sufi, A., and Verner, E., (2015) “Household debt and business cycles worldwide”, NBER Working Paper No.21581. Rachel, L, and Smith, T, D, (2015) “Secular drivers of the global real interest rate”, Bank of England Staff Working Paper No.571, December. Schularick, M and Taylor, A., M. (2012), “Credit booms gone bust: Monetary policy, Leverage Cycles, and Financial Cycles, 1870–2008”, American Economic Review 102(2): 1029–1061. Waldron, M, and Zampolli, F (2010), “Household debt, house prices and consumption in the United Kingdom: a quantitative theoretical analysis”, Bank of England Working Paper No 379.
Thomas Jordan: Comments on Swiss monetary policy Speech by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the 106th Ordinary General Meeting of Shareholders of the Swiss National Bank, Berne, 25 April 2014. *  *  *  Mr President of the Bank Council Dear Shareholders Dear Guests The Swiss National Bank (SNB) has a mandate to ensure price stability, while taking due account of the development of the economy. The monetary policy decisions needed to fulfil this mandate have a direct impact on the size and composition of our balance sheet. As a result of the current size of our balance sheet and the nature of our investments, it can be assumed that the annual results will continue to fluctuate significantly in the foreseeable future. Since summer 2007, the global economy has experienced a series of crises. At times, it was on the brink of the abyss, and the threat to the Swiss economy was correspondingly great. In order to fulfil our statutory mandate, we have been obliged to resort to unconventional measures, rather than operating solely with the familiar monetary instruments. The most exceptional measure was certainly the introduction and enforcement of the minimum exchange rate against the euro. However, the creation of the stabilisation fund to take over illiquid assets from UBS was also a special measure. In 2013, this episode was successfully concluded. By contrast, the minimum exchange rate remains the SNB’s key monetary policy instrument.

The situation in a number of financial markets was hampering the transmission of our monetary policy, a monetary policy stance that we had judged to be appropriate precisely the previous Thursday. That had to be put right. The exceptional circumstances demanded that we act swiftly. HB: What volume will the purchase programme have? Trichet: I do not provide any figures at the moment. HB: The markets would like to know in somewhat more detail how you intend to absorb the liquidity again. Trichet: Allow me to repeat myself: We are not changing our monetary policy stance. We are not embarking on quantitative easing. We will withdraw the liquidity that we will inject mainly through tendering term deposits. HB: Will that be possible? Trichet: Of course. It does not present technical difficulties. That is what we intend to do. And let me say, that what counts, is our determination and the fact that we are true to our primary mandate of safeguarding price stability. The Governing Council will not tolerate inflation. HB: Is Greece an isolated case? Could the same happen to other countries as well? Trichet: Greece was clearly in a unique exceptionally grave situation before it embarked on its adjustment programme. But I call solemnly upon all countries to implement programmes commensurate to recover sound fiscal situation. HB: What has to be done?