samchain/econo-pairs-v1 huggingface dataset:
Andréa Maechler will examine the implementation of our monetary policy in more detail later. Inflation forecast  I would now like to address the development of inflation. Inflation has declined somewhat in recent months, and stood at 3.0% in November. This decrease was above all attributable to  Page 1/4  Berne, 15 December 2022 Thomas Jordan  News conference  smaller price increases for oil products. However, inflation is still clearly above the range we equate with price stability, and is likely to remain elevated for the time being. Our new conditional inflation forecast is based on the assumption that the SNB policy rate is 1.0% over the entire forecast horizon (cf. chart 1). Up to the beginning of 2023, the forecast is below that of September owing to the somewhat lower oil price. From mid-2023 onwards, the new forecast is higher and stands at 2.1% at the end of the forecast horizon. That our new forecast is higher over the medium term despite the raising of the SNB policy rate is attributable to stronger inflationary pressure from abroad and the fact that price increases are spreading across the various categories of goods and services in the consumer price index. The new forecast puts average annual inflation at 2.9% for 2022, 2.4% for 2023 and 1.8% for 2024 (cf. table 1). Without today’s SNB policy rate increase, the inflation forecast would be even higher over the medium term. Global economic outlook  I will now move on to the economic outlook.

The cost would have been 3½% in foregone output and a rate of inflation more than a percentage point further below target. In a more recent study, Aikman et al. (forthcoming) come to similar conclusions. They find not only that monetary policy has relatively weak effects on financial stability, at least in the UK, but also the converse – that, partly because they’re directed more at mitigating tail risks, rather than affecting the most likely path of the economy, macro-prudential policies do not have very large effects on demand and inflation. Chart 6 is a summary of their results. The impacts of the two policies on growth and inflation are on the left-hand side, with the effects on measures of financial stability on the right. The responses to a change in monetary policy are in white, those to macro-prudential policy in blue. It’s very clear in this paper, at least, that the 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  comparative advantage of monetary policy is in  Chart 6: The impacts of monetary and  stabilising growth and inflation with financial stability  macropru policy  best left to macro-prudential policy10.
In the following, I would like to describe the development of inflation over the past few months and explain our latest inflation forecast in more detail. The dotted curve in the graph shows our inflation forecast of June 2001. At the time, we expected inflation to climb slightly to 1.6% by mid-2002 and, subsequently, to recede gradually towards 1.2% by the beginning of 2004. This forecast was based on the assumption of a robust development of the world economy and a stable three-month Libor rate of 3.25%. We assumed at the time that the economic slowdown experienced in the United States and Europe would be overcome as early as in the second half of 2001 and that the Swiss economy would be able to perform according to its potential. The price of oil was expected to stand at approximately USD 25 per barrel. Our forecast of June overestimated the inflationary development of the last few months. Year-on-year inflation, as measured by the national consumer price index, dropped to 1.0% in the third quarter 2001 from 1.5% in the second quarter. In October inflation amounted to 0.6%, and to 0.3% in November. This sharp decrease can be mainly attributed to the marked fall in oil prices and prices of other foreign goods. Moreover, upward price pressure on domestic goods also eased markedly in November after still having been substantial until October. The dashed curve in the graph shows our latest inflation forecast. The table contains the average annual inflation rate according to the new forecast.

This decision was a critical step in moving monetary policy expeditiously away from the very accommodative stance that we put in place early in the pandemic. The Committee is strongly committed to returning inflation to its 2 percent objective. In determining how quickly and how high to raise the rates in the future, we'll watch closely to see how the economy responds to tightening financial conditions and how inflation, inflation expectations, and the economic outlook evolve. As always, we will be data-dependent and nimble in our approach. With tighter monetary policy in place, supply and demand will be brought back into balance, and inflation will return to our 2 percent longer-run goal. This may take some time and may well be a bumpy road. Closing I'll close with this: Inflation is far too high, and price stability is absolutely essential for a strong economy. We have the tools to get the job done and are one hundred percent committed to achieving our goals. Thank you. 1 See Federal Reserve Bank of New York, “Regional Economy Profiles: Puerto Rico;" Federal Reserve Bank of New York, “Puerto Rico Economic Indicators." 2 Ruchi Avtar, Rajashri Chakrabarti, and Maxim Pinkovskiy, “Was the 2021-22 Rise in Inflation Equitable?," Federal Reserve Bank of New York Liberty Street Economics,  June 20, 2022. 3 Board of Governors of the Federal Reserve System, Federal Reserve Issues FOMC Statement, June 15, 2022.
Given this scenario, the enhancement of the income from services by promoting the services sector would definitely help the country to have a stable balance of payments position. What should the country do to attain the goal of having a vibrant and efficient services sector? First of all, it should invest heavily in infrastructure so as to facilitate the production of services. In this connection, the proposed international airport and the port in Hambantota and the attendant roadnetwork would make a significant contribution to facilitate the promotion of global services. But the country should not stop there. As a top-most priority, the road network should be improved to be on par with global standards. Roads would create access to markets and reduce transaction costs. Since the services, like the visibles, should be produced at the cheapest costs to attract global customers, the maintenance of efficiency at all levels of the economy is a must. For this purpose, the country need be wired electronically covered by a reliable road network. The most important requirement for a sustainable services sector is the continuation of the development and supply of the needed human resources. The plan made by Singapore at the turn of the new millennium in this regard is a guidance for other countries. The Singaporean Ministry of Education is reported to have instructed, in 1999, all the tertiary educational institutions and universities to concentrate on courses on genetic engineering, ICT, nano-technology and entertainment so as to provide the skilled human resources needed for the future.

Even in the predominantly agricultural areas, the trend has been the same. Consequently, it has become a nearly impossible task to keep the rural youth occupied in agricultural activities. This has made it necessary for opening new employment avenues for such youth. An additional factor has been the natural limitation for growth of agriculture due both to the slow growth in demand for agricultural products and the supply constraints of land for further extensive cultivation practices. Hence, in the beginning, agriculture may be the growth promoter, but later, its growth would slow down due to the above limitations. The global experience has been that the average rate of growth in agriculture has been less than 2 percent per annum during the last 100 years. With higher and higher numbers being added to the job market every year, agriculture has, therefore, a limitation for providing jobs for all. Sri Lanka’s agriculture sector has made its utmost contribution to create wealth and employment in the past. Its current ability to do so has been a matter for debate. With employment in agriculture being seasonal and the concentration of a large farm-based work-force on a limited extent of cultivable land, underemployment has been the natural corollary in Sri Lanka. The new evidence shows that the under-employment in agriculture in Sri Lanka is not only the highest but also on the increase.
6  BIS Review 28/2010  Those considerations remain relevant today. Shareholders in global banks have lost 40% of their net worth since the start of the crisis. The implied volatility of global banks’ equities is around 50% higher than at the start of the crisis. At its peak, it was seven times higher. Confidence in banks’ balance sheets has been shaken to the core. It is unlikely to be restored by a return to murky valuation and hidden reserves.   “Gambling for resurrection”  One special case of shareholder protection arises when management increase their risktaking incentives as the probability of failure rises. Such incentives are in-built in a world of limited liability. But the ability to engage in such gambling for redemption depends importantly on the degree of information asymmetry between the shareholders and the manager. The lower the transparency of the accounts, the greater the incentives and ability of management to bet the ranch. This type of behaviour is if anything more likely among banks, given the intrinsically greater opacity of their assets. And examples are legion. For example, in the run-up to the Savings and Loan crisis in the US, many thrifts financed long-term fixed rate assets with variable rate deposits, thereby running significant interest rate risk. This was a big gamble. But because it was disguised in the accounts, neither regulators nor the thrifts themselves felt obliged to manage this risk. As interest rates rose, the gamble failed causing many thrifts to collapse.

In response, the Office of Thrift Supervision required fair values to be reported from the early 1990s.   “Timely risk management”  Perhaps the most recent of the arguments used to support fair values arises from its role as a risk management device. Market prices, while noisy, offer timely signals. They are likely to prompt early recognition and management of emerging risks and mistakes, by both regulators and the regulated. Sunlight is an effective disinfectant. In this regard, it is telling that more widespread marking to market accompanied regulatory efforts to improve prompt corrective action measures – for example, in the US through FDICIA. Among market participants, the use of fair values and fleet-of-foot risk management techniques is widely felt to have contributed to the relative success of some firms during the course of the crisis. Lloyd Blankfein, CEO of Goldman Sachs, certainly appears to think so. 16 For the prosecution, the main arguments also appear to be threefold. Essentially, these follow from the three commonly attributed failures of the EMH.   “Excess volatility”  If market prices exhibit greater volatility than warranted by fundamentals, this will be mirrored in the balance sheet footings and profits of entities marking their positions to market. This is far from a new phenomenon. Robert E Healy, the SEC’s first Chief Accountant back in the early 1930s, lamented that firms “can capitalise practically everything except the furnace ashes in the basement”. 17 The impact of fair values on profits may have been even greater over recent decades.
But it is worth reiterating that the Bank’s intervention last autumn was to focus on the resilience of the gilt market, rather than to protect the funds and schemes themselves. So LDI funds should carefully consider their individual risk profile. And pension schemes should not mistake naturally occurring variation in resilience, which reflects variation in risks, for a race to the bottom. These proposed resilience levels are broadly consistent with those firms have been maintaining since the co-ordinated regulatory action last autumn. And indeed they have been put to the test recently. Between end March and late May, the benchmark 30-year index-linked gilt yield rose by 82 basis points. During that time, the largest five-day move stood at 27 basis points. These changes in yields mechanically reduced the resilience of LDI funds and led to a number of LDI funds recapitalising in order to replenish their resilience. This recent volatility shows that the resilience framework recommended by the FPC is functioning broadly as intended, with funds holding significantly larger buffers than last year on average and initiating recapitalisation at far higher levels of resilience than they did previously. It means they have managed to absorb rather than amplify this shock. So far so good. We will though assess whether there are any lessons to be learned from this recent experience for the implementation of the FPC recommendations and TPR guidance. Of course, LDI funds are not expected to self-insure against all possible shocks.

Third, the extensive financial reforms and development of the domestic financial markets since the Asian financial crisis have significantly strengthened Asia’s financial systems to better manage the more volatile capital flows. In addition, rigorous surveillance is being undertaken. This has allowed several economies to introduce preemptive measures to preserve monetary and financial stability. The near term outlook for emerging Asia going into 2011 remains positive. For Malaysia, despite slower external demand, the overall growth is expected to remain strong, supported by the continued expansion in private domestic demand. Favourable employment conditions, firm commodity prices and an accommodative policy environment will continue to underpin growth in private consumption. Meanwhile, the positive outlook on the domestic-oriented sectors and the recently announced economic transformation programme has improved the  BIS Review 146/2010  1  investment climate. Intra regional trade is also expected to continue to provide support to the growth and development process. Transition to high value-added high income economy Beyond the near term horizon, the Malaysian economy is currently at a significant juncture in its development. The economic future of our country depends on the success in our transition to becoming a high value-added economy. For more than five decades, Malaysia has demonstrated its economic flexibility to adjust to the changing environment and to continuously enter into new areas of competitive advantage.
Is the dominance of the dollar in world reserves a reflection of historical factors that are less and less relevant today? Or are there fundamental reasons for the world's central banks to continue using one main currency as a source of liquidity? Second, given that each bloc’s policy choices reflect domestic objectives, what could be achieved through international meetings? The starting point is the need to find a common analysis. Domestic policies should at least be based on mutually consistent assumptions. Only when there is agreement on the nature of the risks inherent in current international monetary arrangements will there be the possibility of a cooperative outcome that is an improvement for all, not just for some. Third, how might we arrive at such a common analysis? The G-7 arose out of an earlier episode of concern about exchange rate movements in the 1980s. Most smaller countries can choose their exchange rate regime without worrying about its impact on the rest of the world. But the large countries – especially the three blocs I identified at the outset – cannot ignore their interdependency. That is why it is important to expand the group of countries that discuss these issues beyond the G-7 to include those, such as China and India, whose actions increasingly have global economic consequences.

Therefore, promoting “evidence-based policies”, as with the signing of this agreement, amounts to both a technical argument in favour of effectiveness and a political statement in favour of democratic oversight of political power by citizens and their representatives. In order for these evaluations to be carried our properly, they need to be conducted by independent researchers and institutions, who must have the appropriate high-quality and sufficiently detailed data. Under this agreement, an independent and rigorous evaluation will be launched of a specific public policy: the pilot projects for developing inclusion itineraries for beneficiaries of the Minimum Income Scheme. To this end, the rigour, independence and technical excellence of CEMFI’s researchers are paired with quality data provided by the government and its stated desire to design its policies on the basis of empirical evidence. This alone should be reason for satisfaction. I hope that the results of this evaluation will help improve the future design of this public policy and that this exercise will contribute to establishing a culture of evidence-based policies that will benefit all citizens. I believe that this kind of initiative can be particularly useful for Spanish society at a time when these policies, including the roll-out of the projects financed with NGEU funds, need to have the capacity to address the structural transformations facing our economy, such as those arising from the fight against climate change, the reduction of inequalities, the improvement of productivity, digitalisation and population ageing.
In summer 2007, these factors were combined or interacted with one another to create a situation where confidence was suddenly withdrawn from the global financial system, which then went out of control. Even though three years have now elapsed since the start of the crisis, it would be rash of us to claim that we have clearly identified the cause of the accumulation of the systemic risk revealed in the crisis and are now in a position to prevent the accumulation of such risk in future. For instance, although the bubble in the US housing market was identified at a relatively early stage, its threat to the system was totally underestimated. This fact clearly shows that systemic crises and their effects are difficult to forecast. Even in summer 2007, as it became obvious that the US housing market was in a  BIS Review 146/2010  1  very precarious situation, almost no-one foresaw the huge impact this would have on the global financial system and the world economy. Ladies and gentlemen, we are all aware that systemic crises will occur again and again. This is because risk in the financial system pro bably always emerges at a moment when we are not yet in a position to fully identify or understand it.

In particular, the delayed downward adjustment of prices and nominal wages has sharply increased the real cost of adjustment and the burden borne by the more vulnerable members of society. Private sector wage costs saw barely any downward correction in some countries, even when unemployment was starting to rise substantially (especially in Spain, but initially in Greece as well). Among the programme countries, Ireland is the only one where the downward adjustment of relative prices has been sizeable, a factor which has helped it to avoid an even stronger decline in output and employment. The disconnect between the adjustment in unit labour costs and the adjustment in the harmonised index of consumer prices (HICP) reflects the lack of competition in the domestic economy. It also reflects other cost factors affecting the evolution of prices, including fiscal consolidation being partly achieved through higher indirect taxes and administrative prices.5 It calls for great determination in reducing the excessive profit margins that result from monopolistic competition, in particular in sectors sheltered from international competition.6 Reducing rents is not only a matter of efficiency in the adjustment process: it is also a matter of equity in sharing the burden of adjustment. And this point leads me to the second part of my talk. (2)  The aggravating factors  [Slide 7] The adjustment has been costly, in some cases very costly. Some of the costs in terms of falling output and employment were, unfortunately, unavoidable.
While  Page 8 of 8 monetary financing is prohibited by the European treaties, it would, for example, according to these theories, be possible to imagine the central bank creating money on a lasting basis to directly finance companies. In principle, nothing is excluded in intellectual debate. However, steps such as these could only be envisaged if there was a major “downside” risk for price stability. It would therefore be imperative to ensure that any such measures guide inflation towards its target. Indeed, the two pillars that must remain in place come what may during these exceptional circumstances are the central bank’s mandate – ensuring price stability – and its independence – particularly from fiscal authorities. Because these two pillars are set down in the Treaty, and, above all, because they are the foundation of our most precious asset: the confidence of European citizens in their currency. ** I would like to conclude by saying a few words about the Banque de France. We have mobilised our activities on five key fronts: our network’s support for VSEs and SMEs and households in difficulty; needs with regard to paper money; economic analysis and monetary policy; close monitoring of the markets; and the supervision of the financial resilience of banks and insurers. In this period of extraordinary uncertainty, you can count on the commitment of the women and men that make up the Banque de France.

This means that every two weeks of lockdown “costs” us approximately 1.5% of lost annual GDP and at least 1% of additional government deficit. II. Building the appropriate economic policy responses  2.1 The emergency: rapid, strong and convergent responses during the crisis Confronted with this unprecedented, and totally unforeseeable crisis, rapid, strong and convergent responses were implemented across the board in fifteen days to stem the effects of a severe economic shock. The lessons of 2008 have not been forgotten. Seldom has there been such a solid consensus on the direction and the scope of the measures to be taken, including among economists, which is quite rare. In France, we have put in place a shield to protect businesses of all sizes and to help them get through this shock, which in turn protects their employees. This “cash shield” is fashioned from both unprecedented fiscal and monetary measures. The fiscal measures put in place by the government primarily revolve around deferring payments of taxes and social security contributions, a solidarity fund for the self-employed and above all initiatives for those in partial employment – formerly referred to as “technical unemployment”, but we have fortunately inverted that description. France has thus learned from the success of Germany and its Kurzarbeit in 2009.