samchain/econo-pairs-v1 huggingface dataset:
Thomas Jordan: Price and financial stability - a demanding year for the Swiss National Bank Speech by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the 115th Ordinary General Meeting of Shareholders of the Swiss National Bank, Berne, 28 April 2023. *** Madam President of the Bank Council Dear Shareholders Dear Guests It is a pleasure for me to welcome you to our General Meeting today. I see many familiar faces, but also a large number of new shareholders. A warm welcome to you all. I am delighted that so many of you have responded to our invitation. We are living in extremely turbulent times. Our last General Meeting was marked by Russia's invasion of Ukraine, and the General Meetings in the previous two years by the coronavirus pandemic. This year we have witnessed a shock to the Swiss financial sector, namely the crisis at Credit Suisse and the takeover of the bank by UBS. Today, I would like to give you some more detailed information about the role of the Swiss National Bank in managing this latest crisis. I will also set out how we have been combating inflation with our monetary policy since the last General Meeting. Let me start with the second topic. Tighter monetary policy to ensure price stability The SNB is obliged by Constitution and statute to pursue a monetary policy that serves the interests of the country as a whole.

Good progress has been made and we expect the new competency framework can be rolled out within the next few months. 5. I would like to thank the TMA and its committees for their tireless efforts in joining hands with the HKMA and others in the “platform building” work. Measures that make Hong Kong more competitive as a wealth and asset management centre 6. It is not easy to come up with an exhaustive list of factors that affect Hong Kong’s competitiveness as a wealth and asset management centre in Asia. There are some factors such as air quality, law and order, cost of doing business, international school places, etc that have a major effect on individual firms’ decision to locate or expand operations in Hong Kong and not elsewhere, but these factors apply across the board and are not confined to the financial services sector. What I propose to do now is to highlight a couple of key “soft” infrastructure that is uniquely important to Hong Kong’s future development as the wealth and asset management hub in Asia: (a) as we all know, the existence of an inheritance tax or estate duty, even at low rates, is a material impediment to the development of wealth and asset management businesses. Back in 1998, the HKMA started to lobby the HKSAR Government to abolish the estate duty in Hong Kong in order to foster Hong Kong’s development as a wealth management centre.
When we intervene in the foreign exchange market, we exchange new Swiss francs for foreign currency instead of giving them away. The creation of money in the context of foreign exchange market interventions is thus not ‘debt-free’. Economic order  Another problem is that the Swiss sovereign money initiative is etatist and imposes an unnecessary burden of responsibility on the SNB and disempowers the private sector. This does not fit in with the Swiss concept of the state and runs counter to proven principles of economic order. In order to achieve its aims, the initiative also does not shy away from providing for the possibility of general restrictions in economic freedom. This is clearly set out in the second sentence of the proposed article in the constitution. Adoption of the initiative would impose additional tasks on the SNB. The SNB today has the clear and appropriate mandate to ensure price stability and has a large degree of flexibility in fulfilling it. Under the sovereign money system, the SNB would have to assume tasks which far exceed this mandate. The initiative imposes two additional tasks on the SNB: first, making ‘debt-free’ payments and, second, guaranteeing the supply of credit to the Swiss economy. The latter is problematic because it could lead to a conflict of interest between price stability and credit supply. Above all though, it means that the SNB would have to decide precisely who should receive the loans.

In this regard, the reform in late 2022 of the Code of Good Banking Practice (CGP) focuses precisely on orderly debt restructuring for household segments with a high degree of socio-economic vulnerability. The Banco de España will assess its implementation as more data become available. How different banks and financial systems position themselves against these risks will determine how resilient they are. In this regard, amid such high uncertainty, including that surrounding the degree of monetary policy tightening, Spanish banks must implement a prudent provisioning and capital policy. A policy that earmarks part of the short-term increase in earnings to bolster the sector’s resilience would thus put it in a better position to absorb any potential losses should the worst risk scenarios materialise. From a European standpoint, it should also be noted that a smoother-functioning euro area with improved governance would contribute hugely to making the European financial system less vulnerable. In particular, the creation of a fully mutualised European deposit insurance scheme would boost the confidence of citizens and the markets and contribute to increased risk-sharing in the euro area and, thus, to reducing potential episodes of fragmentation. 9  The values within this range are obtained based on different assumptions regarding the percentage of debt that matures in the short term and is refinanced. The 6.8 pp impact at the upper end of the range assumes the full renewal of the debts maturing in the short term.
It has, on the other hand, been associated with a rise in the number of job openings. It is not altogether easy to interpret this development. One interpretation could, however, be that companies after the financial crisis have, to a greater extent, been looking to recruit workers with different types of cutting-edge expertise. This is unfortunately a type of labour that is often difficult to find. This is also the impression I get when I have travelled around the country and talked to different companies. If higher wages are offered, it is for this type of labour, but this nevertheless does not appear to have prevented a shortage of labour from emerging in this segment of the labour market. 11 [16]  On the increasingly dominant “traditional” labour market, however, labour shortage does not seem to have been such a major problem. There, a flexible labour supply has helped to restrain wage increases, in the way I described earlier. Why has inflation risen? The Phillips correlation measured in terms of inflation has been negatively sloped since 2011, while in terms of wage increases, it has been completely flat. How then has inflation risen despite wage increases not having done so? Inflation rose steadily between 2014 and 2017, measured in terms of the CPIF, from around 0.5 per cent to a level consistent with the inflation target of 2 per cent.

Sources: Statistics Sweden and the Riksbank  Of course, the correlation between the exchange rate and inflation is neither clear-cut nor straightforward. It depends, for example, on what has caused the exchange rate to fluctuate and how long it is expected to last. 6 But the fact that there is a correlation, insofar as a weakening of the exchange rate tends to result in rising inflation and vice versa, is obvious. Finally, it should be emphasised that monetary policy has of course been important in this development. From the ongoing debate, the impression can sometimes be that monetary policy does not play such a major role and that economic activity had been just as strong and inflation had been on target regardless of the policy conducted by the Riksbank. This is of course not the case. No causal relationship between wages and prices What then does the fact that inflation has risen but not wages actually signify? To begin with, and for the sake of completeness, we can also plot inflation against wage increases (see Figure 8). As we see, there is a tendency towards a positive correlation, at least periodically. See for instance the articles “The impact of the exchange rate on inflation” in the December 2016 Monetary Policy Report and “The exchange rate and inflation” in the April 2018 Monetary Policy Report. 6  13 [16]  Figure 8.
Today, such a system does not generate any benefits for most EU members. There now exists a wide range of monetary policy frameworks, running from currency boards and hard pegs (used by Denmark and the Baltic states) to inflation-targeting economies with floating exchange rates (the UK, Sweden, the Czech Republic, Poland), with other countries lying somewhere in between. Countries with currency boards have been allowed to pursue their original policy within the ERM-2, meaning that fulfilling the condition of staying inside this system is a formality. But what is the sense in asking countries that already use inflation targets and floating rates to enter the ERM-2? The step is simply counter-productive. It implies switching from a regime that is perfectly compatible with the European Central Bank framework to a semi-fixed exchange rate, which is incompatible. We certainly do not need any exchange rate band to assess whether a currency is stable as determined by the market - we can just take a look at the prevailing market exchange rate. Similarly, the budget deficit threshold of less than 3 per cent of gross domestic product has been modified by the stability and growth pact, which sets stricter criteria for keeping the fiscal house in order. All EU members are expected to comply with the pact, so that staying under the Maastricht 3 per cent limit is again purely a formality. This Maastricht criterion could be abolished without any harm being done. What about inflation?

If the uneven pace of economic recovery in the euro area is confirmed and if we see a risk of inflation being too low for too long, we can take action in June. We can act in various ways, depending on the situation. At present, however, it is too early to say what exactly we’re going to do. A lot depends on the forthcoming economic data and on our staff growth and inflation projections, which are to be released in June. Your room for manoeuvre is limited as interest rates are already very low: the key rate is only 0.25%. They are low but they can still go lower. Are negative interest rates in the euro area possible? Negative rates are one of the instruments available to us. They have been discussed extensively by the Governing Council. We are technically and legally prepared for such a possibility. And market participants are well aware that we are contemplating such a move. Wouldn’t negative rates discourage people from keeping their money in banks? This depends on how negative they would be. Indeed, rates that fall deep into negative territory could have an impact on depositors. But a deposit rate slightly below zero does not necessarily imply that depositors would be affected, while still providing incentives for banks to lend more. In recent years, the ECB has used a number of non-standard monetary policy tools. It has purchased bonds on the market, pumped hundreds of billions of euro into the market in the form of cheap loans for banks.
As stated on previous occasions, the provision of liquidity and the allotment modes for refinancing operations will be adjusted when appropriate, taking into account the fact that all the non-standard measures taken during the period of acute financial market tensions are, by construction, temporary in nature. Let me now explain our assessment in greater detail, starting with the economic analysis. In the first quarter of 2011, the euro area recorded strong real GDP growth of 0.8% quarteron-quarter, following the 0.3% increase of the fourth quarter of 2010. Recent statistical releases and survey-based indicators point towards a continued expansion of economic activity in the euro area in the second quarter of this year, albeit at a slower pace. This easing reflects the fact that the strong growth in the first quarter was partly due to special factors, which will cease to play a role in the second quarter. Hence, it is appropriate to look through such short-term volatility and to emphasise the positive underlying momentum of economic activity in the euro area. Looking ahead, euro area exports should be supported by the ongoing expansion in the world economy. At the same time, taking into account the  BIS central bankers’ speeches  1  favourable level of business confidence in the euro area, private sector domestic demand should contribute increasingly to economic growth, benefiting from the still accommodative monetary policy stance and the measures adopted to improve the functioning of the financial system.

Furthermore, there is a risk of increases in indirect taxes and administered prices that may be greater than currently assumed, owing to the need for fiscal consolidation in the coming years. Finally, upside risks may come from stronger than expected domestic price pressures in the context of increasing capacity utilisation in the euro area. Turning to the monetary analysis, the annual growth rate of M3 was 2.0% in April 2011, after 2.3% in March. Looking through the recent volatility in broad money growth, M3 growth has continued to edge up over recent months. The annual growth rate of loans to the private sector strengthened slightly to 2.6% in April, after 2.5% in March. Overall, the underlying pace of monetary expansion is gradually recovering. At the same time, monetary liquidity accumulated prior to the period of financial market tensions remains ample, with the potential to accommodate price pressures in the euro area. 2  BIS central bankers’ speeches  Looking at M3 components, the annual growth rate of M1 decreased in April, while that of other short-term deposits increased. The development partly reflects the gradual increase in the remuneration of these deposits over recent months. At the same time, the steep yield curve implies a dampening impact on overall M3 growth, as it reduces the attractiveness of monetary assets compared with more highly remunerated longer-term instruments outside M3. However, available information suggests that this impact may be waning.
Thus, for financial institutions with insuperable solvency problems, it is proposed that the appropriate rescue solution be implemented. For other institutions, that are solvent, but in difficulties that make a strengthening of their capital advisable, many governments have made capital available to them through shares, or other debt instruments that are, for regulatory purposes, deemed to be capital, such as preference shares. Apart from capital strengthening, and in order that solvent institutions should start to function again as normal and have access once more to financial markets that have remained blocked, government guarantees are going to be granted for issues of bank debt. This latter line of action, i.e. that relating to the availability of liquidity and financing, has been supplemented in the case of Spain by the purchase of highquality assets. Finally, and in order to boost the confidence of depositors, practically all countries have increased the amount covered by deposit guarantee schemes and have proposed reducing the period within which such deposits must, where necessary, be returned to depositors. The Spanish government has prepared a roadmap that envisages all these actions. It will be implemented not so much to alleviate solvency problems, which have not materialised in our country, as to help restore confidence and facilitate institutions’ access to financing. The ultimate aim is to avoid institutions’ financing difficulties being the cause of a reduction in lending to firms and households.

Luis M Linde: Monetary policy in the advanced economies Speech by Mr Luis M Linde, Governor of the Bank of Spain, at the Nueva Economía Fórum, Madrid, 8 July 2014. *  *  *  Let me first thank the Nueva Economía Fórum for their kind invitation to participate in today’s event. I shall briefly be discussing the monetary policies currently being implemented by the main advanced economies. The similarities and differences between such policies are not always readily understandable and they add complexity to the current economic circumstances. After a brief overview of the role monetary policies are playing in managing the international crisis, I shall specifically refer to the cases of the United States, the United Kingdom and Japan, and then focus in greater detail on the European Central Bank’s approach and on the measures it has recently adopted. The role of monetary policies in managing the international crisis Unlike in the Great Depression, and largely as a result of the lessons learned from it, the economic authorities responded swiftly, robustly and in a relatively coordinated fashion internationally when the crisis in the advanced economies broke. This response took the form of a raft of measures to support financial systems and the application of a series of expansionary demand-side policies. The measures set in train were aimed firstly at heading off a potential global liquidity crisis, which would have seen the functioning of financial systems and, therefore, of economies themselves collapse.
As I have mentioned earlier in my speech, reaching lasting stability in the global economy will take time and therefore, no notable recovery is expected in domestic economic activity in the short run. Within this framework, aggregate demand conditions are expected to continue to support disinflation for some time (Graph 26). In sum, compared to the January Inflation Report, the revised inflation forecasts are based on increased favorable contribution from aggregate demand conditions to disinflation. Graph 26: Output Gap (Percent) 8 6 4 2 0 -2 -4 -6 -8 -10  00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 Q1 Q3 Q1 Ç3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1  Source: CBRT. The problems in global economy and tighter credit conditions still persist. Following recent financial measures and policy rate cuts, domestic demand is expected to gain a relatively stable trend in the second quarter of 2009 and growth is expected to generate positive rates as of the final quarter of 2009. Meanwhile, considering the current global economic outlook, it  16  BIS Review 67/2009  is estimated that access to foreign financing facilities will remain limited for a while, economic agents will continue their cautious stance and no significant pick-up will be observed in aggregate demand in the short run.

The new substrate makes the notes more robust, and we expect them to have a longer life cycle; this, in turn, will have a positive effect on overall costs. Mass production of the notes, involving a new substrate, complex printing procedures and innovative security features, initially posed a few unexpected problems. This led to delays. The SNB had originally planned to issue the first denomination in autumn 2010, but it became clear that additional development work would be needed before the green light could be given for mass production. The issue date had to be postponed twice on account of these refinements. The decision to deploy a new substrate was a bold one – and turned out to be the right course of action, as it allowed us to incorporate unique security features. However, we were dependent on one supplier for the production of the Durasafe substrate, and this had consequences around two years ago. When the Durasafe manufacturer Landqart found itself facing a liquidity shortage in 2017, the SNB decided to take over the company in conjunction with Orell Füssli in order to safeguard banknote production using this unique substrate. Another key element of the new banknote series is the design. The core design elements on the notes were to be memorable and feel contemporary even years later. We wanted motifs that would not only be clear and vivid but would also have emotional appeal. Here too, we had to overcome some obstacles.
This allowed us to deploy a range of unconventional policy tools to ensure that inflation remained in line with our aim. Neither operating monetary policy according to a fixed rule nor restricting ourselves to conventional policy tools would have sufficed. Discretion and flexibility in the use of our tools helped to strengthen our credibility. Flexibility and credibility were, in this instance, mutually reinforcing. By contrast, rules lose credibility if they are applied with discretion. Rules will be undermined if countries find reasons to circumvent them or rewrite them as soon as they bind. But circumstances will always arise which were not foreseen at the time the rules were written and which call for flexibility. In the case of rules, there is an inevitable trade-off between credibility and flexibility. This is why there are always tensions when it comes to economic policies that follow the rulesbased approach. But the transition to an institutions-based approach requires trust between countries. And trust is based on strict compliance with the existing rules, but also on the ability of governments to reach mutually satisfactory compromises when the circumstances call for flexibility and to explain them adequately to their citizens. That transition nevertheless remains necessary. The European Commission’s recent initiative on the international role of the euro provides a further example of the need to move from the current framework of various laws and ad hoc rules to a system based on harmonisation and institutions.

[24] The same protections do not exist at the global level or are much weaker in other regional trading blocs such as NAFTA. The history of the United States itself illustrates the difficulty of aligning the approaches of individual states to improve working conditions. In the early 20th century, there was a growing concern in several US states about the lack of a social safety net, especially for the elderly. But individual states feared that providing social security would impose, in the words of the time, “a heavy tax burden on the industries of the state that would put them at a disadvantage in competition with neighboring states unburdened by a pension system.”[25] The lack of coordination created a severe underprovision of social security, which was exacerbated by the Great Depression. In 1934, half of the population over 65 were in poverty. [26] This was only resolved through the passing of the federal Social Security Act in 1935, which enabled states to coordinate in providing social security. In a similar way, the EU provides a powerful coordination function that allows countries to achieve goals that they could not realise alone. And the EU is able in turn to export some of its 4 / 10  BIS central bankers' speeches  standards globally. The EU is the top trading partner of 80 countries, compared with just over 20 for the United States. [27] That allows the EU to insist on higher labour and product standards abroad via trade agreements,[28]as well as protecting local producers at home.