samchain/econo-pairs-v1 huggingface dataset:
Yves Mersch: Interview in Luxemburger Wort Interview with Mr Yves Mersch, Member of the Executive Board of the European Central Bank, in Luxemburger Wort, conducted by Mr Pierre Sorlut and Ms Barbara Tasch on 8 March and published on 14 March 2018. * * *  Mr Mersch, the Governing Council has not yet decided to raise the interest rate. When that happens, the debt-to-service ratio will increase and put pressure on households who took out loans to buy their houses. How big is the danger? Let me say first that the bigger the imbalances, the less the economy is prepared for a monetary policy change. Any change in the monetary policy stance is always a shock to the economy, positive or negative. It’s not in our mandate to consider the households of any particular country when we change the monetary policy stance. That includes Luxembourg. We set interest rates for the euro area as a whole. We are not yet ready at this stage to change interest rates. We first take the nonconventional measures towards the exit. Only then will we consider the conventional ones. Today, at our press conference, we confirmed that we’re confident with the path which is leading to our objective. The primary objective is price stability, which we have defined as an inflation rate of below, but close to, 2% in the medium term. Second, on some banks’ balance sheets, loans to the private sector are very substantial and in some there is a high concentration of mortgages.

I don’t know, and I do not have to know, national initiatives in a national context in this respect. On the central bank side we have sanctions at national but also at European level. You’re referring to the case of the Latvian bank ABLV... The Latvian subsidiary. I read in the media that the supervisory side of the ECB informed the 2/5  BIS central bankers' speeches  national authorities of what happened and suggested to them to use the tools they have at their disposal. Since the way the national tools were used is now the subject of a court case, I cannot comment further on it. Let the court decide. The national central bank for its part took its own measures. And they suspended the bank. The ECB did not suspend the whole group [from monetary policy operations] until later. The Banque centrale du Luxembourg (BCL) suspended the group before the ECB because they have the possibility to do so at national level. Would you have another example? There are some investment funds which ought to provide information and statistics to the national central bank, which then reports to us. But some funds don’t do it. We have asked the BCL several times to initiate sanctions because we consider that the local authority has clear knowledge of the matter. I think they are now ready to do it. I would not say centralisation is better per se. Sometimes proximity leads to higher efficiency.
The implications of the crisis internationally-wide entered primarily through the external sector, and particularly through the transmission channels given below: -  the export-based production registered swift and rapid fall, due to the depreciated global demand, whereas the downward revision of the domestic demand took place  2  BIS Review 127/2009  in a slower pace, leading to some import reduction (particularly in the last quarter of the last year and the first quarter of this year), -  this uneven pace of the fall in the exports and the imports brought about widening the trade gap, whereas the increase in the uncertainty and establishment of bearish expectations caused decrease in the net inflows from private transfers, Reasonably, it led to higher current account deficit in this period,  -  although the syndrome of sudden cessation was not present, the capital inflows went down significantly, making the current account funding fall considerably on the foreign reserves,  -  the perceptions for increasing the macroeconomic risks made the banks accumulating foreign assets, the households converting large amounts of Denars into foreign currencies, thus creating additional pressure on the foreign reserves of the Republic of Macedonia. Accordingly, the consequences of the crisis could not be avoided, which is understandable if the size and the openness of the Macedonian economy are taken into consideration.

  JPM has made material contributions to Singapore’s financial markets with developments such as the launch of the Singapore Kilobar Gold Contract with the SGX in October this year. 2  BIS central bankers’ speeches    JPM was one of the lead managers in Singapore’s first RMB corporate bond issuance earlier this year, which helped to broaden the range of RMB product offerings in the market. On this note, let me congratulate JP Morgan on 50 years of growth in and with Singapore. MAS looks forward to deeper partnership with JP Morgan in further developing Singapore’s financial sector. I am confident that your strong presence in Singapore will serve you well as you extend your footprint in Asia. Thank you for being part of the Singapore growth story. BIS central bankers’ speeches  3
An important external factor underlying the favourable prospects for inflation is the sharp decline in oil and commodity prices, which is partly associated with developments in Asia. Moreover, domestic sources of inflation, such as those arising from the labour market situation and capacity utilisation, are also relatively moderate at the present juncture. In my opinion, taking a euro area wide perspective, these views are also broadly compatible with current monetary and financial developments. In this connection, please take note that we should soon have new information on monetary developments on the basis of the new statistical reporting framework for money and banking. The environment of significant volatility in international financial markets, particularly stock markets, appears to account for much of the recent decline in long-term interest rates in the euro area to historically low levels, as investors have sought to protect themselves against heightened global risk. Nonetheless, it is notable that the euro area yield curve shifted downwards at all maturities, which to some extent would tend to indicate a further decline in long-term inflation expectations for the euro area as a whole. As we approach the start of Stage Three, we shall need to continue to monitor closely economic, monetary and financial developments within the euro area and in the world economy. This will allow us eventually to set the interest rate for the euro area as a whole.

On the other hand, the rise in costs can increase the pressure to  raise central government allocations. Many will probably expect the central government to pick up the bill when labour costs rise sharply. In the business sector - with its profitability requirements - higher labour costs must be matched by an increase in productivity. In principle, the central government will impose the same requirements on government agencies. How these requirements will be met in practice will have a decisive impact on developments in central government expenditure and, consequently, on the interest rate and the krone exchange rate.
By doing so, the MPC will not only deliver on its mandate, but will also create an environment of price stability in which households and firms can take the longer-term investment and spending decisions that drive the dynamism, innovation and productivity gains on which UK living standards depend. The MPC has tightened monetary policy over the past eighteen months to achieve the 2% inflation target. Bank Rate has been increased from its effective lower bound of 0.1% to today’s level of 4.25%. Quantitative easing (QE) has been halted and replaced with a programme of quantitative tightening (QT), involving the sale of gilts and corporate bonds held as a result of the Bank’s earlier asset purchase schemes. [1] And the MPC’s communication about the outlook for monetary policy has shifted significantly. Picking up on this lattermost point, in the monetary policy summary published following March’s MPC meeting, the Committee noted: “if there were to be evidence of more persistent [inflationary]  Page 3  pressures, then further tightening in monetary policy would be required”. [2] Even as the Committee’s communication has evolved, some variant of this line has been included in the MPC’s communication since the middle of last year. It illustrates the shift towards more data-dependent and conditional statements about the monetary policy outlook since I joined the MPC in the late summer of 2021. As is clear from the sentence I quoted, the concept of inflation persistence lies at the heart of the MPC’s assessment and communication of the policy outlook.

Between September 2021 (when I first joined the MPC) and its peak at the end of August, the January future price of UK wholesale natural gas rose by a factor of eleven. 17. In the MPC’s forecasts, our initial technical assumption was that gas prices would follow a random walk (in other words, they would stay at their then high level permanently) and then shifted to assuming they would follow the (downward) path implied by market futures prices. 18. For a critical assessment of this approach, see Beaudry, P., T.J. Carter and A. Lahiri (2022). ‘Looking through supply shocks versus controlling inflation expectations: Understanding the central bank dilemma,’ Bank of Canada working paper no. 22-41. 19. The Bank of England employs a suite of wage and price models as part of the analytical machinery underpinning the MPC’s quarterly macroeconomic forecasts. These models capture variants of the Phillips curve, with spot wage or price  Page 14 developments depending on measures of inflation and inflation expectations, as well as import prices and measures of economic slack. See, for example: Speigner, B. (2014). ‘Long-term unemployment and convexity in the Phillips curve,’ Bank of England working paper no. 519 and Esady, V., B. Speigner and B. Wanengkirtyo (2023). ‘Revisiting the effects of long-term unemployment on inflation: The role of non-linearities,’ Bank of England working paper no. 1018. 20. See Pill, H. (2023). ‘UK monetary policy outlook,’ speech by Huw Pill at the Money Market Association of New York University, 9 January. 21.
The MPC since I joined it at the end of 2013 certainly appears to have been pretty consistently stodgy in the sense of slow moving. We have moved policy twice over that period. And one of those moves was a response to an exceptional and unprecedented exogenous event – the Brexit referendum. Only one move, the rate increase last November can be thought of as usual, ‘bread and butter’ monetary policy. There has been one or more votes for changing policy in only 22 of the 49 meetings. When I compare this to 2002 to 2007 -- my period on the Committee as the Treasury representative -- the contrast is striking. Over that period, the Committee moved policy 12 times and with one or more votes for changing policy in 41 of the 56 meetings. This lack of action from the Committee since I joined it as a member in 2013 was certainly not the reflection of lack of developments in the UK economy. From mid 2013 to early 2015, unemployment dropped like a stone – by 2pp in the space of 18 months, the fastest rate for 25 years. At the same time, growth was picking up from close to 1% to about 3%. 1  Blinder (1999) 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  Nor was it the result of lack of advice. As Mark Carney has recently pointed out, the pre-crisis MPC had always tightened policy in response to accelerating growth and firming business confidence.

In the past, as we all know, reversals of capital have trigged serious debt defaults, banking distress, and currency crises. So, with the nature of risk becoming more external, the abilities of central banks to respond effectively to the new challenge based on domestic measures will be limited. This calls for a reconsideration of policy coordination, both in the context of within-country coordination, and cross-country coordination. The third implication from the global crisis is the heightened expectation and trust that the public now has on central banks, as guardian of stability, to do its utmost to avoid financial crisis, and to do it professionally and independently. In the west, the current crisis has diminished public trust on the roles of government and financial institutions in safeguarding and upholding public interest. To this end, central bank independence is seen as an  BIS Review 138/2010  1  important pre-condition for ensuring safety, continuity, and stability. This is a challenge that central banks will need to recognize in performing their duties. So, given this backdrop, challenges facing central banks going forward will be more demanding. And to meet these challenges, central banks will need to be thinking clearly on at least two issues. The first is the right policy framework to respond to the challenge.
BIS Review 131/2010  3  In order to maintain operational flexibility in terms of their business operations and an ongoing ability to distribute capital to their shareholders, we expect that banks will want to maintain their level of tangible common equity at or above 7 percent, the sum of the minimum requirement and the conservation buffer. However, we do anticipate that the buffer may be penetrated from time to time during adverse economic environments. Finally, the risk-based ratios will be back-stopped by a new leverage ratio standard, which will constrain the amount of overall leverage that a banking organization can take relative to the sum of its non-risk-weighted assets and off-balance-sheet exposures. Together, these changes represent a very significant upgrade of the standards: A much higher proportion of this ratio is now met by common equity; that common equity is much better quality than before; the amount of risk-weighted assets against which capital must be held has increased and better reflects underlying risk; a new capital conservation buffer is added, and there is a new backstop against excessive leverage. So what were the considerations that went into constructing this new standard? The basic goal was to enable the big, internationally active banks covered by the Basel Accord to absorb the type of losses associated with a major marketwide financial shock and still retain sufficient market confidence so that they could continue to be able to fund themselves and, if necessary, to raise additional equity without the need for unusual government support.

The adjustment costs associated with the LCR standard should be low because, like capital, there are different, relatively low-cost ways to adjust to the standards. For example, because the liquidity buffer only needs to last for 30 days, a bank that extends the maturity of its shortterm wholesale borrowing or its deposit liabilities by a month or two will find that this goes a long way in helping to meet this standard. Banks could also cut the level of their backstop liquidity lines and other commitments to financial firms. The standard assumes that such lines of credit can be fully drawn upon and thus, count as potential draws against the buffer. Because the common international liquidity standards are relatively untested, regulators are implementing LCR with an “observation period”. What this means is that unanticipated and unintended consequences generated by the new liquidity standard will be closely scrutinized and, if necessary, adjustments will be made to the rules if undesirable effects become evident over time. For example, the tough requirements on backstop liquidity lines could potentially be modified if such rules generated unintended negative consequences for shortterm corporate funding markets, such as the nonfinancial corporate commercial paper market. 6  BIS Review 131/2010  Moving on from the changes to capital and liquidity standards, I now want to discuss how firms, markets and the official sector deal with distress in the event that it does occur.
The figures from the labour market also look gloomy and leading indicators are retreating. Although the stock exchange has shown an upturn in recent weeks, it is still very volatile and the household sector's burden of debt is continuing to increase. Leading economists have ceased talking of a V-shape when they describe economic developments. The upturn will come, but it will probably take longer than was estimated a month or so ago. This is what one should bear in mind when regarding the four American interest rate reductions of a total of 2 percentage points during the spring, two of them outside of the normal Federal Reserve Board meetings. It is hardly likely that the Fed knows something they have not told the market, which is what is sometimes implied by analysts. This is not the way a central bank works. However, the American economy came to a standstill more quickly than expected and the Fed probably fears that the unease on the financial markets will frighten away both investors in real capital and consumers from spending their money. This fear is certainly justified. Then, of course, one can feel some hesitation over the fact that monetary policy is taking on the role of short-term saviour of the American consumers, who can thus carry on consuming beyond their incomes for some while longer, i.e. with a negative savings ratio.

But a bank’s goal should be to provide service to its customers through financial intermediation, as Mark Carney has explained so eloquently. 6 Christine Lagarde sees this as a  4  Cf. E. Gerald Corrigan, Are Banks Special? Federal Reserve Bank of Minneapolis Annual Report, January 1983, (“[T]he presence of the public safety net uniquely available to a particular class of institutions also implies that those institutions have unique public responsibilities and may therefore be subject to implicit codes of conduct or explicit regulations that do not fall on other institutions.”). 5  See Thomas C. Baxter, Jr., Reflections on the New Compliance Landscape, Remarks at “The New Compliance Landscape: Increasing Roles – Increasing Risks” Conference, July 24, 2014. 6  See Mark Carney, “Inclusive Capitalism: Creating a Sense of the Systemic,” Address to the Conference on Inclusive Capitalism, May 24, 2014. BIS central bankers’ speeches  3  question of animating purpose – of “telos” – and I agree. 7 Similarly, the Archbishop of Canterbury, Justin Welby, has called for financial institutions to reset to the first principle of service, playing a role in the world that contributes to “human flourishing.” 8 If you don’t believe me, listen to the Archbishop: It is possible to do good and do well at the same time. And remember one of attributes that attracts the best and the brightest to an organization is the prospect of quality work.
Financing Major Transitions My second example of how the Bank is providing a platform for private innovation concerns the financing of the major transitions shaping the new economy such as the rapid rise of emerging economic powers and the evolving response to climate change. The transition to a low carbon economy, in particular, will require enormous re-allocations of capital and massive investments in infrastructure—on some estimates as much as $ trillion globally over the next decade. Firms that anticipate these developments will be rewarded handsomely; those that fail to adapt will cease to exist. This will have enormous ramifications both the financial system and for financial stability.2 That’s why the Bank is transforming our soft infrastructure. Recognising the need for adequate reporting of climate-related risks and opportunities, four years ago the Bank helped catalyse the private sector-led Task Force on Climate-Related Financial Disclosures (TCFD). The TCFD has now led to a step change in the demand and supply of climate reporting. With over $ trillion in assets now demanding TCFD quality disclosures, a market in transition is now being built. 1  RTGS Renewal Programme: A blueprint for a new RTGS service for the United Kingdom. Available at: https://www.bankofengland.co.uk/paper/2017/a-blueprint-for-a-new-rtgs-service-for-the-uk 2 Carney, M. (2019). A New Horizon. Available at: https://www.bankofengland.co.uk/speech/2019/mark-carney-speech-at-europeancommission-high-level-conference-brussels 4  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  4  In parallel, the Bank is overhauling its supervisory approach.

On the supervision side – or better known to you as the examiners that come and pay you a visit every now and then – a new department known as the Financial Conglomerates Supervision Department has also been established to facilitate the integrated supervision of financial service groups that include both banks and insurance companies under their umbrella. The new cross-sector regulatory structure allows us to modernise the regulatory framework for both the insurance and banking sectors at a more equal pace. The increased synergies created will enable the Bank to apply the best regulatory practices in the banking sector to the insurance sector, and vice versa. Regulations in the area of market conduct, for example, are more advanced in the insurance sector than they are on the banking sector. On the other hand, the regulatory framework for risk management and capital adequacy is generally more developed on the banking side. Under the new structure, the Bank is able to leverage on the more advanced developments in either sector to enhance the regulatory framework for both sectors simultaneously if possible. This, in turn will promote a more consistent and comparable regulatory regime for the banking and insurance sectors. Substantial resources have already been allocated to this effort, particularly in the areas of corporate governance, product regulation and financial reporting which have an important bearing on banks and insurers that are within the same group.