samchain/econo-pairs-v1 huggingface dataset:
And there is more the Bank can do to widen and deepen its educational offering in schools. On each of those fronts, however, the Bank has over the course of the past ten years established robust foundations on which to build. 40  Haldane (2018b). 21  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  21  When it comes to one particular aspect of transparency - forward guidance - I think a more fundamental rethink may be needed, however. Forward guidance was introduced by central banks after the Global Financial Crisis. In principle, it offered real promise. Offering a soft pre-commitment to a given policy path could bring forward some of the effects of future policy, giving it extra bang for its buck.41  In practice, these benefits are only achievable if the policy guidance issued is hard enough to offer some credible pre-commitment, at the same time as being soft enough not to lock central banks in too tightly should circumstances change. This is a classic Three Bears problem: how to choose a form of words that is neither too hard, nor too soft, but just right. Getting guidance just right is a problem central banks, a decade on, have not solved satisfactorily. In my view, with few exceptions forward guidance has ended up either being too vague and ambiguous to offer an effective source of assurance to the outside world, or a source of regret among central banks who have over-committed to something ex-post undesirable.

That said, there are some nascent signs that the economy may be doing better. For example, based on the first estimate, which is subject to revision, real GDP increased at a 2.8 percent annual rate in the third quarter of 2013, above the trend of the past four years. And the most recent payroll employment report showed a pickup in the monthly pace of job gains. The 3-month moving average rose back above a 200,000 pace after slowing to about 150,000 as of July of this year. I hope that this marks a turning point for the economy. But before we rush to this conclusion, a few more cautionary comments are appropriate. With respect to GDP growth, it turns out that inventory investment contributed ¾ of a percentage point to that overall growth rate. Thus, because this impetus from inventories will  BIS central bankers’ speeches  1  likely reverse this quarter, the real GDP growth rate is likely to slow to around a 2 percent annual rate or a bit less in the fourth quarter. With respect to payroll employment, we have seen such bursts in payroll growth before over the past few years and have been disappointed when the pickups proved temporary and did not lead to a rise in the overall growth rate. But, I have to admit that I am getting more hopeful.
The volumes of goods and services traded and amount of currency handled by individual traders may seem small. However, they are collectively significant and have implications for the conduct of monetary policy. For instance, the World Bank estimates small-scale border trade in Southern Africa to be around $ billion. Other studies have estimated that small-scale cross-border trading accounts for about 42% of GDP in Sub-Saharan Africa. Ladies and gentlemen, it is for this reason that this roundtable symposium has been convened with the following objectives: 1. To stimulate broader interest in the topic of small scale cross border trade;  2. To initiate an inquiry into the design of a World Bank project aimed at fostering small scale trade and innovative cross-border payment services in Southern Africa; and  3. To look at the opportunities for providing cross-border money transmission services that benefit both small-scale trade and remittance transfers. It is anticipated that this roundtable symposium shall come up with a refined design of the World Bank project to be launched later in 2011 focusing on five countries in Southern Africa, namely: Angola, Malawi, Mozambique, South Africa, and Zambia. A draft copy of the project design has been circulated to you all. The project will aim at enhancing trade through lower transaction costs for trade payments and improved access to financial services for smallscale traders. The goal is to increase small value trade payments through formal channels and transition payments away from cash by improving competition and innovation in the market for trade related payment services.

It also demands greater agility, astuteness and foresight on our part to go beyond and able to ride on the next wave of growth – either at the higher end of the spectrum of financial services that focus on sophisticated and high value added activities or the lower end that cater for the traditionally underserved, as well as opportunity to fully realise the benefits from the greater regional and international integration. At the same time, a myriad of challenges including global regulatory reform, transformational technology and changing generational expectations will continue to drive change in the years to come. This would also mean that financial institutions will need to meet higher standards of how they manage risks and govern their operations. Against this background, the professionalism, productivity and capability of our talents become more important now than ever before. Future success will hinge on our ability to constantly remould the workforce in the banking industry for a new marketplace, with emphasis on a corresponding increase in the levels of knowledge, skills, competencies and  BIS central bankers’ speeches  1  overall quality of our talents. We clearly have an urgent and important task ahead of us. The critical questions therefore need to be asked here – Have we done enough to sustain the competitiveness of our workforce to meet the current and future industry needs and what more can be done to propel the industry to new heights?
As an explanation for the inflation we’ve experienced I think this fits the actual data better than the single fact of strong household money growth during the pandemic. It’s always possible, at least with the benefit of hindsight, to construct an alternative path for monetary policy over the past that would have kept inflation on target, even in the face of these subsequent shocks. But that’s not the same thing as saying that the actual policy was “inevitably” going to result in excessive inflation. Simulations suggest that, had that alternative (much tighter) policy path been followed, and then had Russia failed to invade Ukraine, inflation would now be materially below target. Anyhow, what follows is a walk – rather a long walk, I’m afraid – through these various points. Less ink is spilled on the second question, concerning QT: should the MPC not include in its forecasts some identifiable and separate effects of asset sales on activity and inflation? Having argued that the policy is transmitted to demand and inflation largely via asset prices my answer to this will be “no”. The Committee has said that the size of the Asset Purchase Facility (APF), the vehicle through which QE and QT are conducted) will be reduced gradually and predictably and, to that end, announced last September the exact planned reduction of the APF over the following twelve months. As such, it’s reasonable to suppose that the impact of QT, even in prospect, is already captured in the prices of assets on which we condition our forecasts.

In Chairman Clayton’s view, “tokens and offerings that incorporate features and marketing efforts that emphasize the potential for profits based on the entrepreneurial or managerial efforts of others continue to contain the hallmarks of a security under U.S. law.”22 In 2018, SEC staff published guidance to clarify that exchanges, investment vehicles, investment advisers, and dealers doing business in digital currencies that are digital asset securities would be subjected to securities laws.23 The guidance makes clear that digital currencies that function as securities will be subject to U.S. securities law, but where we draw this line may not always be clear. Products that blur the boundaries between money and securities are not new. Take, for instance, certificates of deposit. In 1982, the United States Supreme Court analyzed whether a certificate of deposit was a security for purposes of certain U.S. anti-fraud laws. The Court concluded that it was not. In doing so, the Court recognized that the most important distinction between a certificate of deposit issued by a bank—money—and other long-term debt was the comprehensive regulation of the banking system. 24 The Court’s conclusion was a sensible one more than a century after the “wildcat” banking era: Lawmakers could not  have intended to treat money in the banking system like it was something else because there was no need to do so. At least for now, the case does not appear to be as strong for digital currencies.
In the medium term, cost contanment and continuous improvement in efficiency will be pivotal in ensuring sound profit and loss accounts. Spain’s membership of the euro area, which has made its economy more stable, has nevertheless enabled a faster pace of credit expansion than traditionally seen in this country, without Spanish institutions having suffered notable financial imbalances. That said, their managers have to continue to act prudently and responsibly, considering possible changes in the economic situation that may arise during the course of the cycle and adopting strategies designed for the medium and long term. Another matter on which institutions should reflect from this medium-term standpoint is the quality of their own funds. Indeed, it should be borne in mind that their strengthened ROE has been driven in the last decade by increased leverage of the quality of their capital (i.e. the growing weight of subordinated debt relative to capital stock and reserves). Insofar as that leverage is reaching a maximum, no further improvements in ROE derived from changes in the composition of regulatory capital should be expected. The challenges to be faced by financial institutions are, however, not limited to those deriving from the more conjunctural factors; they are in fact largely traceable to the important changes in financial systems in the last few years.

In fact the scope for SONIA adoption in markets beyond derivatives is a key issue we want to explore – and will be discussed in the panel sessions later today. We do not underestimate the complexity of reducing the financial system’s Libor dependency. We are at the beginning of the process, and at this early stage the challenges are not all clearly in focus. That is why the engagement, help and support of the wider community of users of sterling interest rate benchmarks – issuers, investors, banks, as well as dealers – will be essential. The Working Group needs your help to identify the impediments to transition as you see them – and, equally, to identify where there are opportunities. That is why you are here today. The way ahead So what happens now? I have argued that, over time, we need to see a broad transition away from sterling Libor towards SONIA. That will require changes in the behaviour of firms that carry some cost. But, where SONIA better matches the risks firms are hedging, there will be long-term benefits. Moreover the financial system will be safer. The Bank has already laid the groundwork for transition by reforming SONIA and creating the risk-free rate working group. We will continue to use our convening power to support the Working Group in driving adoption of SONIA. We will help market participants to understand changes in the environment and how they might be affected.
Risk-weighted assets were calculated, to put it simply, by first giving the banks’ different assets risk weights of between 0 and 100 per cent, depending on how risky they were assessed to be. For instance, the banks’ mortgages were given a risk weight of 50 per cent. A bank’s risk-weighted assets were then calculated by multiplying the value of the respective type of asset by the respective risk weight. Basel I meant that the banks should have capital exceeding eight per cent of the bank's risk-weighted assets. This requirement still applies, although the content of both the banks’ capital and their risk-weighted assets have changed over time. Basel II and III entailed more risk-sensitive capital requirements and increased model risks At the beginning of the 1980s, several countries deregulated parts of their credit markets. As a result, the banking systems in many countries rapidly became more complex and even more internationally interlinked than before. New types of more complex financial instrument were introduced. Moreover, new and more advanced methods for measuring risk and risk management were developed and refined by most of the banks. Many agents, including the Basel Committee, assessed that Basel I needed to be reworked to become more risk-sensitive and to better reflect developments in the banks and in society. The banks were keen on pushing this question as they wanted to use their own methods for calculating capital requirements. In 2004, the so-called Basel II Accord was published.

The conflict in Ukraine and the sanctions levied on Russia had consequences for the Russian economy but also created unease over the political and economic development of eastern and central Europe in general. We saw drastically reduced demand from the global growth engine of recent years, China. This gave new fuel to concerns over an imminent hard landing of the economy there. The severe conflicts in the Middle East started to make themselves increasingly felt via a heavy increase in the numbers of people seeking safety in Europe. The possible effects of the central banks acting out of step – after a number of years of crisis policies – also led to a degree of concern. There is always uncertainty but, nevertheless, my impression is that it has been unusually high over the past year. Uncertainty in itself can cause problems as it can lead households and companies to hold off consumption and investment, and can reduce companies’ willingness to raise their prices. Everything else being equal, a higher degree of uncertainty therefore argues for a more expansionary monetary policy. In addition, greater uncertainty over international developments also entails a greater risk that the Swedish economy will be exposed to such strong negative pressure that we will end up in a really serious situation with persistently falling prices and employment. A desire to lower the chances of such a situation may, in itself, argue for a more expansionary monetary policy.
An oil price increase triggers a loss in the economy’s terms-of-trade and implies a transfer of wealth from oil-importing countries to oil exporters. This change in the terms-of-trade (in relative prices) requires an adjustment of the real economy and must be absorbed by markets. The policy-makers’ aim should be to facilitate this adjustment by minimising inflationary pressures and aggregate output losses. In reacting to oil price shocks, it is, therefore, important that policy-makers do not repeat the mistakes of the past by attempting to stabilise output growth at unrealistic levels. In the 1970s, such attempts led to a prolonged period of high and costly inflation, rising unemployment and sizeable fiscal deficits. Monetary policy should aim to ensure that inflation expectations are not adversely affected by the unavoidable “first-round” direct and indirect effects of an oil price shock on the price level and that they remain anchored to price stability. By preventing oil price shocks from having “second-round” effects on inflation expectations and on wage and price-setting behaviour, monetary policy can contain the unfavourable consequences of these shocks on both inflation and growth. It can prevent the fuelling of an inflationary spiral and the persistence of inflationary pressures, it can facilitate the real economy’s adjustment to the change in relative prices implied by the oil price shock, and it can thus help to minimise the associated output losses.

The low level of interest rates, both in nominal and real terms, and the generally favourable financing conditions have been lending support to the ongoing economic recovery in the euro area. Fiscal imbalances in the euro area have not improved in 2004, while the current account balance remained virtually unchanged. According to the European Commission, the average general  2  BIS Review 66/2004  government deficit in the euro area increased to an estimated 2.9% of GDP in 2004 (from 2.7% of GDP in 2003), while the current account is expected to record a surplus of close to 1% of GDP, slightly higher than in 2003. Although the Commission is projecting a decline in the total euro area fiscal deficit to 2.5% of GDP in the years 2005 and 2006, the slow pace of fiscal consolidation is a cause of concern, especially in view of the expected growth in the coming year and given the underlying imbalances associated with population ageing. Greater progress towards healthier public finances will strengthen confidence and support, rather than hinder, the ongoing recovery. Economic effects and policy implications of higher oil prices In this presentation of our assessment of the economic outlook and of our decision on the monetary policy stance, one aspect stands out which is of particular interest to investors, consumers and the financial markets at large - the recent sizable rise in oil prices. This is an important issue, and one on which clear and convincing communication from the central bank is warranted.
However, they also presented some interesting suggestions for improvements. Several of their recommendations concerned how we motivate and explain our role in the stability work. They thought we should be clearer when describing our objectives, and also with regard to the  4  BIS Review 68/2004  boundary between our work and that of Finansinspektionen (the Swedish Financial Supervisory Authority) as well as to why we write a report twice a year. Most of what I have tried to describe now, in other words. These are good suggestions that we are taking into account in the report to be published in two weeks’ time. The authors had other suggestions that I think are good, but probably require more time for discussion within the Riksbank and for possible implementation. The possibility of including a standing chapter that describes our view of a number of current stability issues of a more political nature is interesting. One advantage is that it would give us a reason to jointly develop an overall view on issues of this nature a couple of times a year. Today this is done on an ad hoc basis, in connection with responses to submissions or in connection with some form of reasoning in the Financial Stability Reports. However, a change of this type requires considerable additional work for those working on the analyses and would also take up more of the Executive Board’s time than at present. It therefore needs to be considered in the light of other commitments.

Even countries that have not experienced a financial crisis at first hand are now spending more time on stability work. Although financial stability issues have always been important to central banks, the speeches made by my colleagues at other central banks more often take up these questions now. These issues also appear more often on the agenda of the international meetings I participate in. The increased complexity of the financial markets with new operators and new instruments and the fact that connections between the countries have increased have contributed to added emphasis on stability work. Why is financial stability important? Why should the authorities spend time and energy on this? The primary reason is the important role played by the financial system. Every day each of us sitting here uses the financial system in some way; either to make payments, to save or borrow money or to obtain help with some form of risk management. A huge amount of payments flows through the system. The Swedish payment system has a daily turnover of around SEK 500 billion. This means that in less than a week the turnover corresponds to the entire annual Swedish GDP! While the importance of the financial system has increased, the number of crises in different countries’ systems has also increased. The crises that break out are proving more costly.
And some of it may be because our sights were set too high based on past trends. But I also think there are good reasons to think that the recession, and particularly the impact of the financial crisis, may have dampened underlying productivity growth in recent years. At the risk of stating the bleeding obvious, we need the banks to be working for our economy to grow and prosper. Productivity and monetary policy Why does all this matter for monetary policy? The medium-term outlook for inflation depends critically on the balance of demand and supply in the economy. If demand is greater than the goods and services that can be supplied, prices will tend to rise. And vice versa. As such, when setting monetary policy, the MPC needs to make an assessment about current and future trends in supply, as well as demand. The discussions about economic growth we typically read about in newspapers and see on TV are normally posed in terms of demand. Is gloom on the high street spreading? Claims and counter-claims about the likely impact of the fiscal consolidation. But the MPC also needs to consider the prospects for supply. How quickly is the capital stock likely to grow? And, importantly, will the recent weakness in productivity persist or reverse? Typically, the growth rates of factors determining the supply potential of our economy – population, the capital stock, structural productivity – are far less volatile than those of demand.

The strong growth in our exports seen through much of the past year has faltered, with knock on implications for the growth of manufacturing output. Renewed turmoil within financial markets has led to a sharp reduction in asset prices and to increased funding pressures on our banks. And confidence, both within companies and households, has taken another downward step. The role of monetary policy in such circumstances is to support demand, so as to help bring inflation back to target in the medium term. And that is exactly what the MPC is doing. Interest rates remain at exceptionally low levels. The programme of quantitative easing undertaken last year continues to provide significant stimulus to demand. It is also noteworthy that market interest rates two and three years ahead have declined markedly over the past couple of months, leading a material easing in monetary conditions. If the economic situation continues to deteriorate, some additional loosening in monetary policy might be needed. But that decision will need to be weighed against the backdrop of continuing high inflation, with inflation set to climb higher over the next few months. And, as I’ve emphasised today, it will also need to take account of the extent to which the slowing in output reflects weak growth in supply as well as demand.