samchain/econo-pairs-v1 huggingface dataset:
This is illustrated in Chart 1, which shows that the real rate was 0.8% just before the last interest rate decision. This is lower than in 2013, when there was still a considerable slack in the economy. Of course, the progress made in anchoring long-term inflation expectations at the target — another term for enhancing the credibility of monetary policy — has made it possible, all else being equal, to keep inflation at target over the medium term at lower interest rates than would otherwise be required. But it is questionable whether a real rate of less than 1% will suffice for an economy at or above full employment, with inflation already above the target, with a positive output gap, and with GDP growth that is approaching equilibrium from above. 3  Chart 1  It cannot be said that the interest rate hike took the market by surprise. According to the Bank’s survey of market agents’ expectations, published on Monday, most respondents expected a 0.25 rate increase before the end of the year. The share of respondents who considered the monetary stance too loose had risen steeply since August, reaching 40%. And bond market activity in the wake of the rate hike did not indicate that the increase was unexpected. Even so, the rate hike has been criticised by some of the social partners and some politicians.

In March that year the government and the Central Bank issued a joint declaration abandoning the fixed exchange rate policy and adopting inflation targeting as the mainstay of monetary policy in its place. A target was set for the Central Bank’s monetary policy to keep inflation as close as possible to 2½%, to be attained before the end of 2003. One consequence was that the exchange rate of the króna was floated. Just under two months later, parliament unanimously passed a new Central Bank Act which entailed extensive changes from the earlier legislation. Inflation targeting has established itself in many countries in recent years and has formed the backbone of monetary policy in countries such as the UK, Sweden, Norway and New Zealand, with good results. The new act took account of central bank legislation in other countries and one of its aims is to consolidate the new inflation targeting policy. The most important change from the legislation it replaced was to set a single principal objective for the Central Bank, i.e. to contribute towards price stability. It was granted independence to apply its instruments in order to attain this objective. Furthermore, the Bank was assigned the task of maintaining Iceland’s foreign exchange reserve and contributing to an efficient and reliable financial system, i.e. financial stability. The act also stipulated that the treasury may not borrow from the Central Bank. Specific requirements were made concerning accountability and transparency.
By international standards, the Governing Board is a very small decisionmaking body made up of just three people. Also, it traditionally reaches its decisions by a process of consensus. If the minutes of its meetings were to be published, discussions within the body would probably become less candid and open and – ultimately – the quality of decision-making would suffer as a result. Moreover, it is unlikely that publishing the minutes would in fact lead to better public understanding of monetary policy within Switzerland. That is why, in view of these special Swiss features, we have decided not to release the minutes of our meetings. BIS central bankers’ speeches  3  An additional way of increasing the transparency of monetary policy, and thus its effectiveness, could be the provision of information on the future path of reference interest rates. “Forward guidance” of this kind may be useful for many central banks. However, there are pitfalls and this could easily lead to confusion in the market, especially if the guidance is attached to too many conditions. However, I would not want you to misunderstand me. It is absolutely right that central banks should explain to the general public how monetary policy would react to certain developments. This is nothing new. In the case of the SNB, for instance, the conditional inflation forecast – our main interest rate indicator and an important element in our communications – already provides certain information about the future path of interest rates.

No hard data on industry-wide uptake are available but intelligence from supervisors is that the scale of adoption of advanced analytics across the industry so far is relatively slow. There is clearly, however, the potential for usage to accelerate. At the macroeconomic level, changes in technology, including AI, could, over time, profoundly affect the nature of the financial services consumed and may result in changes to the structure of the financial services industry. This set of issues is being explored at the Bank of England by Huw Van Steenis in his review of the future of the financial system. What matters to  1  McWaters, J (2018) 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  us as prudential supervisors is the extent to which the development of advanced analytics changes the risks to the safety and soundness of the firms we supervise. Increasing levels of automation, machine learning and AI could improve the safety and soundness of firms in some ways. For example, until recently, most firms were using a rules-based approach to antimoney laundering monitoring. But this is changing and firms are introducing ML software that produces more accurate results, more efficiently2, by bringing together customer data with publicly available information on customers from the internet to detect anomalous flows of funds.3 ML may also improve the quality of credit risk assessments, particularly for high-volume retail lending, for which plenty of data are available and can be used for training machine learning models.
Higher interest rates therefore mean higher disposable income and could provide room for some increase in consumption. Chart: Higher debt ratios in all age groups We have experienced a period of sharply rising house prices and debt. The price of entry into the housing market has increased. The 35–45 age group has shown the largest increase in debt ratios, measured in percentage points. Debt ratios in both this group and the somewhat younger groups now average around three times post-tax income. These groups have a high marginal propensity to consume. The elevated debt level in these age groups amplifies the cash-flow channel. But young and middle-aged households are not the only groups to borrow more than previously. A somewhat larger share of total household debt is now in fact held by the older age groups. More debt among the older households reflects the fact that older adults are also active in the housing market and are taking on more debt. To the extent an interest rate increase now curbs growth in household consumption more than previously, it is because many households have taken on substantial debt, not because there has been a noticeable change in the distribution of debt. Chart: Higher interest expenses for many households Since there has been a broad increase in debt ratios across age groups, many households will feel the effects of higher lending rates. The chart shows the effect of a one percentage point rise in interest rates on disposable income for the different age groups.

(b) Coordinated central bank measures announced (12th  6  00  01  02  03  04  05  06  07  Jan 2008  Source: Dealogic. Data to end-December 2007  BIS Review 7/2008  Dec 2007).
The central government invests this amount abroad through the Petroleum Fund. This results in capital outflows and a balance-of-payments surplus. The central government builds up assets, but also obligations through the social security system. Even if a large share of oil revenues is set aside, it would appear that, in the long term, the level of direct and indirect taxes will have to be at least maintained in order to honour these obligations. Petroleum revenues would normally have resulted in substantial currency inflows into Norway. If we had used this capital domestically, we would have had to convert this currency into NOK. The attendant increase in demand for kroner would have resulted in an even sharper appreciation of the krone exchange rate. The capital outflow through the Petroleum Fund contributes to curbing the appreciation of the krone. With oil and gas production now reaching its peak, Norway has - and must have - a substantial balance-of-payments surplus. The return on the Petroleum Fund will to some extent make up for the fall in petroleum revenues in the period ahead. In about 15 years, the return on the Fund may exceed the cash flow from petroleum activities. Norway’s position as international investor may then overshadow its position as an oil and gas producer. Swings in capital markets may have a greater impact on central government finances than oil price fluctuations. We are now in a phase where petroleum wealth is being invested at home and abroad. Norway is and has to be - an international investor.

However, towards the end of the upturn the economy was facing labour shortages, higher wage growth and a sharp increase in household consumption and debt. Interest rates had to be kept at a high level in Norway. Chart 9. Cyclical divergence Short-term interest rates in the US and Norway 10  10 8  Norway  8 6  6  4  4  US 2  2  0  0 1995  1996  1997  1998  1999  2000  2001  2002  2003  Source: EcoWin  The turnaround abroad took place two years ago, but the Norwegian economy continued to show a high level of activity. This led to a widening of the interest rate differential against other countries. The main explanation for the wide interest rate differential is not that interest rates are high in Norway, but that interest rates are at a historic low abroad. Interest rates in the US have not been at such a low level since the 1960s. 1  Measured by the monthly average of the import-weighted exchange rate against 44 countries, the krone was at its weakest level in May 2000 since May 1994. Measured by the monthly average of the trade-weighted exchange rate index, the krone was at its weakest level in May 2002 since the series was started in January 1971. Measured by both indices, there were a few days in autumn and winter 1998 when the krone was weaker than in May 2000.
10  Over the three year period 2008–2010, HBoS incurred losses of £ This amounted to around 5% of its 2008 risk weighted assets £ on a Basel III basis). In the same period, RBS incurred losses on trading activities and impairments on all assets totalling £ or 5% risk weighted assets £ on Basel III basis). These banks failed because they entered the crisis with very low capital strength. On a Basel III basis, RBS is estimated to have had a CET1 ratio of just 1.97% at end 2007. HBoS had 4.1%. See FSA (2011) and Bank of England/FCA (2015). BIS central bankers’ speeches  5  That’s why, although they are well meaning, mandatory restrictions on distributions of dividends, coupons and pay when capital buffers are used can have a perverse effect. They create incentives to avoid dipping into capital buffers by taking actions that have broader economic effects. 11 Our baseline standards mean the biggest banks will be subject to a baseline capital buffer of nearly 5% of risk weighted assets, sitting on top of an 8.5% hard floor for tier 1 capital (see table 1). 12 A buffer of 5% goes beyond agreed international standards. Basel III sets a minimum buffer of 2.5% for all banks (the conservation buffer) and supplements it only for banks of global importance. We are intending to go further for big banks of domestic importance, just as the United States is going further on capital buffers for its largest banks.

To meet their delivery obligations in Swiss francs, the five banks draw on intraday liquidity, which the SNB offers through interest-free repo transactions. Since November, direct system participants have been able not only to use CLS services for their own purposes but also to offer these services to other banks. With this so-called third party business expanding and further direct participants and currencies joining the system next year, more and more payments will be settled through CLS. Currently, about 35,000 transactions in the amount of approximately USD 400 billion are settled in CLS every day. All parties involved are very satisfied with the system's mode of operation. By eliminating the settlement risk, CLS has made a significant contribution to the stability of the international financial infrastructure. 4  BIS Review 73/2002
The members of the Committee shared this concern when we decided to undertake work on the prudential treatment of certain trading-related exposures under Basel II. We do not intend to overhaul the capital rules for trading book exposures, but rather seek to address narrowly a handful of concerns that relate either to potential inconsistencies that could arise with the new treatment for banking book assets or that relate to a limited number of issues that have arisen since the adoption of the Market Risk Amendment. The implementation of Basel II With that, I would like to turn now to my third topic and report on our efforts to smooth the path from the existing capital standards to the new Basel II framework. On the regulatory side, supervisors are working with national authorities to transform the framework into enforceable rules and regulations, within the context of each jurisdiction’s process. This work is well underway in all of the Basel Committee member jurisdictions, but also in many other countries as well. On the supervisory side, let me mention three areas in particular where we are devoting resources to promote a seamless transition to the new framework. Calibration First, we are verifying that Basel II has been calibrated appropriately. The Committee has long stated its intention to conduct work to re-confirm that the new framework meets our objective to broadly maintain the aggregate level of capital requirements, while keeping incentives to adopt the more advanced approaches that are offered.

Jean-Pierre Roth: Rising oil prices – a challenge for monetary policy? Speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, Déjeuners de la Finance, Geneva, 2 November 2005. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  Despite oil prices being at a historically high level, inflation has increased only slightly in recent quarters and growth appears to be robust. Are we to assume, therefore, that oil no longer plays an important role in today’s economic environment? What challenges does the current situation pose for monetary policy? For the first time, the steady rise in energy prices is not the result of a political boycott by oil-producing countries, but of an increase in energy demand, coming in particular from the newly industrialised countries in Asia. In other words, the rise in crude oil prices this time can be attributed to the strong growth in global economic activity. This does not mean, however, that the role of monetary policy has changed. Although core inflation currently appears to be under control in most countries, a persistent and continuous rise in energy costs could have an effect on all prices and wages in the long run, thereby jeopardising monetary stability. Notwithstanding the low level of inflation (excluding energy prices), it is vital that the monetary authorities maintain a forward-looking stance so as not to put their credibility on the line and to ensure long-term price stability. 1/1
On the basis of the analysis in the Inflation Reports, Norges Bank’s Executive Board assesses the consequences for future interest rate development and adopts a monetary policy strategy for the period to the next Report. The Executive Board’s assessment in its meeting 16 March was that the interest rate may gradually – in small, not too frequent steps – be brought back towards a more normal level. The objective of bringing inflation back to target and anchoring inflation expectations nevertheless implies that monetary policy will remain expansionary. The sight deposit rate should be in the interval 2¼ – 3¼ per cent in the period to the publication of the next Inflation Report on 29 June 2006, conditional on economic developments that are broadly in line with the projections. Norges Bank’s Executive Board also decided at its meeting on 16 March to raise the sight deposit rate by 0.25 percentage point to 2.50 per cent. BIS Review 22/2006  5

The second key area of debate concerns the design of the institutional framework for financial stability. The main issues have tended to centre on the role of the central bank in  BIS Review 24/2010  3  financial stability and as to whether there should be a single or multiple supervisory authorities. Given that the central bank is the lender-of-last-resort in a crisis, the central bank is invariably in the frontline of action to restore stability. While there is no general agreement on the optimal structure for the supervision function, it is recognised that financial systems have become increasingly complex and interconnected and whether a country adopts an integrated model or a model that is organized along sectoral lines, effective coordination is critical to support assessments of the overall risk exposures in the financial system. Moreover, the potential for regulatory arbitrage should be avoided. A further case made for central banks to assume the banking supervision function is the informational efficiencies particularly for effective crisis management. The insights gained from the economic analysis and market operations performed by central banks for monetary policy objectives also contributes significantly towards more informed financial supervision. This includes providing a better understanding of the potential for macro-prudential measures as part of the supervisory responses. The chosen supervisory structure needs to credibly demonstrate that it is able to respond and adapt effectively to the fast-changing environment.
François Villeroy de Galhau: Developments in Europe against the background of global uncertainties Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Paris Europlace International Financial Forum, New York City, 18 April 2016. *  *  *  In 2016, the world in general, and Europe in particular, is experiencing a period of uncertainty: uncertainties relating to our security, with the threat of terrorist attacks; political uncertainties, with the risk of a “Brexit” and the refugee crisis; as well as economic uncertainties, with lower economic growth in emerging economies, including China, and high market volatility at the beginning of the year. Nevertheless, recovery is underway in Europe. As you may know, a meeting of the ECB Governing Council will be held in two days, so I have to respect a silent period on monetary policy matters. But I can emphasize that, in response to weak inflation and heightened uncertainties, the Eurosystem, of which the Banque de France is a member, has been acting decisively. And European countries have been implementing structural reforms since the onset of the crisis. Those national efforts are crucial, but we need to go further with more coordination: coordination to direct savings towards projects and countries that need them; coordination of the reforms themselves at the European level.

This more balanced policy mix is an opportunity to engage in new ways of thinking and to strengthen the recovery via stronger economic coordination in Europe. The room for manoeuvre in economic policy is highly heterogeneous across European countries, and each country should use its capacity to improve the overall situation [Slide 6]. European countries have done quite a lot on their own, but now we can and must do more to coordinate demandside policies and structural reforms at the European level. To do so, I would like to make two proposals. 4/ Strengthen Investment First, we need to improve investment financing [Slide 7]. Our efforts should be put towards financing growth and innovation and towards finding the right mix between debt and equity financing solutions, while still preserving financial stability and consumer protection. In the EU, the European Commission has launched several initiatives to serve these objectives, particularly the Investment Plan and the Capital Markets Union. 2  BIS central bankers’ speeches  Second, we need to focus on removing obstacles to investment, providing visibility and technical assistance to investment projects and making smarter use of new and existing financial resources. The European Fund for Strategic Investments (EFSI) drives the Investment Plan for Europe. It supports strategic investments in key areas such as infrastructure, education, research, innovation, as well as risk finance for small businesses. Through the use of limited public guarantees, it aims to foster private investments totalling EUR 315 billion in three years.
Developments throughout the 1990s would seem to suggest that this channel is gaining in importance. However, it is difficult to quantify with any degree of accuracy to what extent monetary policy affects price expectations. The relationship between monetary policy and price expectations is probably fairly unstable. This will be dependent on confidence in the implementation of monetary policy. The Executive Board of Norges Bank currently assesses the Bank’s key rates eight times a year on previously announced dates. In addition to making decisions on interest rates, after each of these monetary policy meetings the Bank issues a statement on its assessment of probable interest rate changes in the future. At the press conference on 9 August announcing the most recent rise in interest rates, the following statement was issued: “today’s decision to raise interest rates brings the overall increase in interest rates to 1.25 percentage points from the beginning of the year. This represents a substantial step in the adjustment of the interest rate that is appropriate on the basis of the analyses in the June Inflation Report. However, the probability that the next change in interest rates will be an increase remains greater than the probability of a reduction”.

The idea behind the Petroleum Fund is that the revenues from an increase in oil prices of this magnitude shall accrue to the Petroleum Fund and be invested abroad, and that the increase in oil prices shall not influence the rest of the budget. In that case higher revenues will not influence the domestic economy, but be invested abroad through the Petroleum Fund. Structural features of the capital account balance The current account surpluses are related to substantial earnings from oil and gas exports. These revenues accrue to the state and oil companies and the capital paid in provides a basis for exports of capital. In the last five years the central government has exported capital not least through the Petroleum Fund’s investments. BIS Review 67/2000  12  Balance of payment Selected items 1996-1999 In NOK billions  When petroleum revenues are excluded, the current account shows large deficits. In recent years, however, capital outflows from some sectors of the mainland economy have been considerable. Large asset managers such as life insurance companies and securities funds accumulated substantial holdings of foreign equities and bonds in the last half of the 1990s. Portfolio investment abroad reflects a desire to diversify. In the period 1996-May 2000 the capital outflow from the Petroleum Fund, insurance companies and securities funds came to altogether NOK 350 billion. In the same period the current account surplus came to NOK 220 billion. This capital outflow has largely been matched by loans raised abroad by banks and other Norwegian enterprises.