samchain/econo-pairs-v1 huggingface dataset:
The pall of misconduct in Fixed Income Currency and Commodity markets The shadow of the worst financial crisis in living memory has been significantly lengthened by a series of appalling cases of misconduct in Fixed Income, Currency, Commodity and other markets. Details of these began to emerge relatively late in the crisis, but they have proved surprisingly prevalent and persistent. And they have further eroded the trust of the general public in financial markets. Public outrage is based on the view that the rewards in finance are disproportionate and that the system is rigged. When people read of malpractice in financial markets, of trading profits being claimed through manipulation, collusion or dishonesty, they naturally wonder if they are one of the people who have been wronged. In fixed income, employees in firms around the world attempted to manipulate Libor, Euribor and other similar measures of short-term borrowing costs in order to benefit themselves or some other part of their firm’s business. In the United States and elsewhere, firms structured the mortgages or other assets used to back securitised assets, or misrepresented the nature of those underlying assets, in ways inconsistent with the interests of end investors. Regulators identified systematic attempts to mis-value and otherwise engage in market misconduct in relation to large scale positions in credit default swaps. In commodities markets, traders were found trying to manipulate physical or derivative prices, including those of gold, oil, lead, platinum, palladium and coffee.

Comparing this set of conditions to that in 2010, the recent slowing of inflation has been less widespread across core goods and core services, and inflation expectations so far have declined less appreciably than they did in 2010. Thus, my best guess is that core goods prices will begin to firm in the months ahead as global demand begins to strengthen and inventories get into better alignment with sales. 1  2  CoreLogic Report Shows Home Prices Rise by 12.1 Percent Year Over Year in April. BIS central bankers’ speeches  As is always the case, there is substantial uncertainty surrounding this forecast. Moreover, there is always the possibility of some unforeseen shock. Thus, we will be monitoring U.S. and global economic conditions very carefully and will adjust our views on the likely path for growth, inflation and the unemployment rate accordingly in response to new information. At its meeting last week, the FOMC decided to continue its accommodative policy stance. It reaffirmed its expectation that the current low range for the federal funds rate target will be appropriate at least as long as the unemployment rate remains above 6.5 percent, so long as inflation and inflation expectations remain well-behaved. It is important to remember that these conditions are thresholds, not triggers. The FOMC also maintained its purchases of $ billion per month in agency MBS and $ billion per month in Treasury securities, with a stated goal of promoting a substantial improvement in the labor market outlook in a context of price stability.
For example, at any point in time, the Federal Reserve will likely need to contemplate a series of current and future policy actions in order to effectively influence the trajectory of the economy and better achieve the goals of monetary policy. In order for households, businesses and financial markets to conduct business in accordance with the Fed’s planning, the public must believe that the Fed will carry out these future actions as expected to achieve its well-understood objectives. Credibility requires a clear public understanding of the Fed’s policy objectives, as well as a belief by the public that the Fed’s actions are consistent with achieving these objectives. Lower levels of credibility would be associated with erratic and misunderstood policy actions that seemed inconsistent with the stated objectives of monetary policy. At this point, it would be useful to describe the typical way in which monetary policy is set by central banks with any eye toward discussing how deliberations should be evaluated for effectiveness and credibility. The policy decision process In setting monetary policy, a central bank like the Federal Reserve must deliberate systematically about a wide variety of important issues. Perhaps at the cost of oversimplifying, I will broadly characterize this deliberative process as consisting of four steps. First, members of the Federal Open Market Committee (FOMC) must have a clear vision of the goals of monetary policy.

Charles L Evans: The Fed’s dual mandate responsibilities – maintaining credibility during a time of immense economic challenges Speech by Charles L Evans, President of the Federal Reserve Bank of Chicago, at the Michigan Council on Economic Education, Michigan Economic Dinner, Detroit, Michigan, 17 October 2011. *  *  *  The enormity of the problem In the summer of 2009, the U.S. economy began to emerge from its deepest recession since the 1930s. But today, more than two years later, conditions still aren’t much different from an economy actually in recession. Gross domestic product (GDP) growth was barely positive in the first half of 2011. The unemployment rate is 9.1 percent, much higher than anything we had experienced for decades before the recession. And job gains over the past several months have been barely enough to keep pace with the natural growth in the labor force, so we’ve made virtually no progress in closing the “jobs gap”. With unemployment having lingered for so long at rates around 9 percent, it is perhaps natural that some would begin to think that nothing more can be done to improve upon this situation. However, I don’t agree. Before seriously contemplating doing nothing, it is important to realize just how enormous this economic problem really is. To put this in perspective, consider that prior to the recession, most analysts thought the long-run trend growth rate of GDP was about 2-1/2 percent per year.
However, we should also keep in mind that globalization also presents some challenges and thus, it has made the job of policy-makers more difficult. Firstly, I would like to underline the concept of financial globalization. Thanks to financial liberalization and improvements in information and communication technologies, significant amount of capital has been flowing into developing countries, especially to those that offer high growth potential – helping these countries achieve relatively high growth levels. In the post-war period when globalization was not a popular buzzword, high growth rates were also observed in a number of countries, usually in the South Asia. However, these countries had something in common, which was high rates of savings. In countries like Turkey, where more than half of the population is 30 years old or younger and where savings rates are comparatively low; foreign savings, and therefore capital inflows are needed to maintain high levels of growth. In this respect, financial globalization has contributed to the convergence process among countries. Financial liberalization has also led to amplification of new and more complex financial products. As a side effect, these financial products have introduced new risks and fragilities to the financial markets. As financial markets have gradually become more integrated, the concept of financial stability has started to receive more attention and become one of the priorities of central banks.

Durmuş Yılmaz: Global challenges and local response – monetary policy in Turkey Address by Mr Durmuş Yılmaz, Governor of the Central Bank of the Republic of Turkey, at a congress organised by the Turkish Economic Association and the International Economic Association, Istanbul, 25 June 2008. *  *  *  Dear Guests, First of all, I would like to welcome you all to Turkey. I am delighted to be here to address such a distinguished audience in Istanbul. I would like to thank the Turkish Economic Association and the International Economic Association for organizing this Congress. Let me start my talk with the words of Josiah Charles Stamp, one of the former governors of the Bank of England in 1920s: “It is easy to dodge our responsibilities, but we cannot dodge the consequences of dodging our responsibilities.” This quote will also be the theme of my speech today. Distinguished Guests, Although globalization had started in the second half of 1980’s, it has not yet reached its peak and we are still witnessing its evolution. As Thomas Friedman’s once said, globalization is making the world flatter. We witnessed record high growth rates around the world in that period; although there was also notable variation in the growth performances across countries. It will not be wrong to argue that globalization could be a powerful tool that may contribute to sustained development if it is combined with compatible policies.
This is why some wholesale banking activity lends itself more naturally to the branch structure which allows funds to flow more freely across borders. This requires regulators to work together to manage cross-border challenges to financial stability – implementing common minimum standards, sharing information and 9  building confidence in how each other will behave when things go wrong . There has been a complementary effort to make it easier to resolve international banks via a ‘single point of entry’ (SPE). Overseen in its home jurisdiction, a SPE resolution would sweep up a group’s losses from around the world and bail in its creditors at the top. The group is recapitalised and does not go into disorderly failure. 7  See Woods, Sam: Contingency planning for the UK’s withdrawal from the European Union; 7 April 2017: “…the PRA will expect those EEA bank branches which have significant retail/SME transactional deposits to discuss with it whether they need to establish a subsidiary, if they plan to continue that activity in the UK after its withdrawal from the EU”. 8 See Bailey, Andrew; Free Trade in Financial Services matters; 29 September 2017. 9 See Carney, Mark; The high road to a responsible, open financial system; 7 April 2017. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  EMBARGO: not for release before 19:30 on Wednesday 4 October 2017  Against this grain, recently the European Commission proposed that non-EU groups above a certain size or systemic importance must establish a common ‘intermediate parent undertaking’.

And we will reserve the right to set double leverage limits or apply 4  capital add-ons for group risk if we are not satisfied .   We will expand capital and liquidity reporting requirements to assess whether firms are allocating financial resources appropriately in relation to risks across jurisdictions and currencies.   And we will use the Senior Managers Regime to ensure somebody is responsible for making sure submissions are up to scratch. In doing this, we are getting to grips with an important geofinancial issue, and showing how we as a home supervisor can ensure that cross-border banks do not present excessive risks to financial stability. The host with the most  The PRA is also responsible for the host supervision of around 170 international banks from over 50 jurisdictions. This includes every single foreign Global Systemically Important Bank and is more than any other EU country. International banks’ UK banking sector assets amount to more than twice UK annual GDP  3  This does not mean we favour a ‘sum of the parts’ approach to setting group capital requirements. For our proposals, see CP 19/17: Groups policy and double leverage and CP 20/17: Changes to the PRA’s large exposures framework. 4 Market discipline already imposes some constraints on the amount of double leverage a holding company can use. Credit rating agencies, for example, take double leverage into account when determining the credit- worthiness of holding companies.
This is as good a time as any to remind everyone that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee or others in the Federal Reserve System. The Economic Outlook If you do an online search about recent economic developments, the word “uncertainty” will come up a lot. And it’s true that uncertainty, both at home and abroad, is playing an important role in my thinking about the economic outlook and monetary policy, as I’ll discuss shortly. But when you take a step back and look at where things stand today relative to our goals, the economy is in a favorable place. The current expansion is the longest on record. The economy continues to grow at a moderate pace, as seen in the latest GDP numbers. And this growth has supported month after month of job gains and a pickup in wage growth in the past couple of years. Furthermore, the overall unemployment rate is near the lowest it has been in 50 years. And the benefits of the strong labor market have been broad across the population: Unemployment rates for African-Americans and Hispanics, while still higher than the overall rate, are near their all-time lows. These low rates aren’t just a fluke of how unemployment is measured in the official statistics—the broadest measure of underemployment, called U-6, is at its lowest level since 2000. These are all very positive signs when it comes to assessing our maximum employment goal.

The economy is in a good place, but not without risk and uncertainty (there, I said it!). Persistently low inflation is a key area of my attention, with the core PCE inflation rate—which strips out volatile food and energy prices—running at 1.6 percent, nearly half a percentage point below our 2 percent longer-run target. 1/3  BIS central bankers' speeches  On its own, inflation somewhat below our longer-run goal would not be such a big deal, especially with our economy strong. But the broader context is important. Ongoing disinflationary pressures from abroad, and the risk that inflation expectations in the U.S. may have drifted down after many years of inflation running below 2 percent, form an important part of this picture. If we look beyond the headline GDP figure, which remains good, there are more mixed signals coming from different sectors. Robust consumer spending is balanced by signs of slowing business investment. We’ve also seen a decline in exports and weakening manufacturing data, reflecting slowing global growth and uncertainty related to trade and geopolitical risks. I am carefully monitoring this nuanced picture and remain vigilant to act as appropriate to support continuing growth, a strong labor market, and a sustained return to 2 percent inflation. Monetary Policy Adjustments This brings me to our decision to lower the federal funds rate in July and how that fits into recent history. Cast your minds back to a year ago, when the Fed was continuing along the path of normalizing monetary policy.
We therefore consider risks to price stability broadly balanced and mainly relating to the outlook for economic activity, higher than expected oil prices, as well as higher than expected indirect taxation and administered prices. •  Since the beginning of the year, financial conditions have continued to improve gradually with corporate bond spreads, stock market volatility, money market term spreads and government bond spreads declining. Is this improvement genuine or is it due to policy measures by governments and central banks? If the latter was true this would be a classical case of moral hazard. These measures cannot be sustained for ever. In this sense, there is no room for complacency. There is rather the risk of a reemergence of moral hazard once temporary measures by governments and central banks are perceived by financial market participants as permanent. •  Where do we stand with financial sector adjustment? Several estimates have been made, both by private and public sector institutions, of the potential losses to be absorbed by the financial system as a consequence of the crisis. Let me illustrate the situation with some key figures: for euro area financial institutions, we estimate the total losses over the period 2007-2010 to be around USD 650 bn. Write-downs on securities have so far amounted to over USD 200 billion. Banks have provisioned and written off over USD 150 bn of their loan exposure. Therefore we estimate further potential losses to be a little below USD 300 bn.

Therefore it is natural that in the field of management science a great deal of research and study on how one can be successful in a highly competitive marketplace has been undertaken. I am no expert in this specialised field and thus not qualified to comment on a wide spectrum of management theories on the path to success. However, I have noticed that in recent years the “Blue Ocean” theory has gained a lot of popularity and support. I too have found considerable merit in this theory because, as the world has become more globalised and interconnected, capital, information and talent flows within and between markets have become much more efficient than ever. A profitable business would attract new participants or entrants, which would result in very fierce competition and the squeezing out of profitability. The Blue Ocean theory suggests that we should try to avoid a crowded marketplace by looking for new lines of business, new products and new markets. In taking the lead in a new market or new horizon, the enterprise can enjoy the first mover and  BIS central bankers’ speeches  1  associated advantages, at least for a period of time. That theory encourages managers and entrepreneurs to think outside the box, and to innovate and explore new lines of business and products. This is all very well, but there is, in my mind, an important catch. We can all see what Bill Gates has done in creating Microsoft and what Steve Jobs did to the success of Apple.
The first one relates to the comparability of the CNB’s forecast with the rest of the forecasts produced by the ESCB members. As I mentioned earlier, the CNB produces an unconditional forecast that includes a reaction function of the central bank. However, this is not the case with the rest of the ESCB members. Although there is a tendency towards the use of unconditional forecasts and the Bank of England and Sveriges Riksbank have started to use at least the trajectory of the short-term interest rate derived from the money market term structure instead of an assumption of a constant short-term interest rate as a base for their forecasts, conditional forecasting still plays a crucial role among the ESCB members. This, of course, seriously reduces the comparability of the results. Second, the forecasting system and the modelling framework have not yet been adjusted to our expected entry into the ERM II and the euro area. ERM II participation clearly raises the question of consistency between the “low” inflation environment required by the Maastricht inflation criterion and stability of the nominal exchange rate, both in a converging economy. Recent experience among the new EU member countries provides some evidence on the difficulties of fulfilling the Maastricht inflation criterion amid a stable exchange rate. The issue to be solved is to what extent the forecasting system should reflect the dualism of the targets, or whether the policy rule should consider the inflation target only, leaving the exchange rate as a fully endogenous variable.

Looking at the short to medium end of the risk-free curve in more detail, our measures (including the pandemic emergency purchase programme, or PEPP) have contributed to a lowering of the medium and long segments of the yield curve compared to the pre-crisis path (Chart 7). Chart 7 EONIA forward curve estimated from overnight index swaps  https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp200519~e5203d3520.en.html  5/14  5/19/2020  Pandemic central banking: the monetary stance, market stabilisation and liquidity  (percentages per annum)  Sources: Bloomberg, Refinitiv and ECB calculations. Note: The latest observations are for 14 May 2020 (for realised EONIA). At the long end of the curve, the combined effect of our asset purchase programmes – comprising the asset purchase programme (APP) and the PEPP – is estimated to compress the term premium significantly by around 80 basis points at the ten-year tenor. Looking just at the decisions we have taken since March, the additional € billion APP purchase envelope for 2020 and the PEPP contribute to a further easing of ten-year rates by lowering the term premium by more than 10 basis points. The total effect of these decisions on longer-term interest rates is likely to be even more substantial, given that the PEPP not only works through the well-known channels of duration extraction and portfolio rebalancing, but also addresses risks to transmission in the euro area. To the extent that this lowers risk premia, interest rates in the euro area have declined even more strongly as a result of our decisions compared with plausible counterfactual scenarios.
And notably, riskier forms of debt – those most sensitive to a change in market conditions – have recently been growing most rapidly. Issuance of leveraged loans and high yield bonds reached a record level last year. 8  6  Paragraph 5 of ‘Record of the Financial Policy Committee Meeting on 12 March 2018’, available here. See Chart 11 in Deloitte (2018), ‘The Deloitte CFO Survey Q1 2018’, available here. 8 Leveraged loans are loans to companies that typically display some of the following characteristics: high levels of indebtedness, a non-investment grade credit rating or ownership by a private equity sponsor. The latter is defined as bonds rated below investment grade. 7  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Last year more than half of the issuance was used to refinance existing debts more cheaply. In the early stages of this year, however, there are signs of that changing. Issuance has been higher than in the same period last year and less is being used to refinance. 9 (slide 9)  These forms of debt accounted for around only 10% of bond and bank loans issued to UK companies last year. But if the pattern of the first 3 months of the year were to continue, they would still – alone – add 3% to the overall stock of corporate debt this year. So recent developments demand careful scrutiny. If they continue, we’ll need to assess, in particular, whether they increase the risks faced by banks.

So that market finance can continue to deliver for the economy in bad times, as well as a good. Thank you. 13  All speeches are available online at www.bankofengland.co.uk/speeches  13