samchain/econo-pairs-v1 huggingface dataset:
At the CNB we define momentum as the three-month moving average of month-on-month changes in prices. We use seasonally adjusted and annualised data to make the figures comparable to the target – the CNB's 2% inflation target is in annual terms. Three-month moving averages of month-on-month changes in prices sound very complicated. Moreover, they are seasonally adjusted and annualised... Simply put, we can look at momentum as the inflation we would have if prices increased at the same pace as in the last three months. Using the example of core inflation: In annual terms, core inflation has been coming down since October 2022. It peaked at 14.7% year on year in September 2022. It fell to 11.5% in March and 10% in April. The momentum of core inflation peaked at 17% in June last year. It is now 7%. So, when the new Bank Board decided on rates for the first time in August 2022, the momentum was already falling. Besides core inflation, the momentum has been declining for demand-pull inflation, which only includes consumer basket items correlated with demand (CNB, 2022). It is an analogy to the supercore inflation measure used by our colleagues at the Fed and the ECB. The momentum of demand-pull inflation peaked at 8% in June last year. It is currently below 2%. So, all the relevant inflation momenta are now falling (Adam and Michl, 2023). However, I repeat that although headline, core and demand-pull inflation are falling and so are the momenta, inflation is still at unacceptable levels.

But the belief that we could avoid the adjustment by pushing up our pay would lead to a self-defeating process of higher wages offset by higher prices. It is the task of the MPC to ensure that the process of adjustment does not lead to a persistent rise in inflation. Bank Rate was raised in order that inflation will come back to its 2% target, and future action will depend upon how those risks to the inflation outlook materialise. The month by month path of interest rates required to bring inflation back to target is a matter of judgment. There is certainly room for reasonable people to disagree about the level or timing of changes in interest rates. There is no absolute truth here, and it is vital that the MPC keeps an open mind at all times. That in essence is my letter to you and all the members of the Birmingham Chamber of Commerce. Achieving the inflation target is, I believe, in the long-run interest of manufacturing no less than the rest of the economy. I recognise that the burden of changes in interest rates often falls disproportionately on manufacturers and other exporters as increases in interest rates push up the sterling exchange rate. And that comes on top of a secular decline – fifty years ago almost 40% of GDP was produced  2  BIS Review 9/2007  by the manufacturing sector. Today that share is around 14%.
Lars Nyberg: Is it dangerous to borrow dollars? Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at Svenska Handelsbanken, Stockholm, 17 May 2011. *  *  *  The lessons of the financial crisis are many. The world’s banks – and a number of institutions that were not banks – had far too little and far too low-quality capital. They also had too little liquidity. The conviction that the markets would always be at hand with more or less unlimited liquidity turned out to be wrong. Across the world, central banks were forced to intervene and to provide the funding that the banks were unable to obtain elsewhere. Now the new regulations known as Basel III are almost in place, even if it will take a few years to introduce them. The banks will need to hold both more and better capital and their buffers for managing liquidity shortfalls will need to increase. Of course, nobody is claiming that this will save us from all future financial crises, but it can reasonably be expected to strengthen the resilience of the financial system to shocks. The most apparent shortcomings brought to light during the crisis can be said to have been remedied. Even so, there is naturally still much work to be done. One issue that must be addressed is how to take care of banks that nevertheless become insolvent and must be wound down, as this is an area where the crisis revealed major shortcomings in a number of countries’ legislation.

A recurrent vulnerability of the region has traditionally been the reliance on foreign currency denominated financing. This financing pattern was exposed to sudden stops in capital flows. With the progressive achievement of price stability, the attractiveness of local markets and local currencies increased and the Latin American authorities took this opportunity to promote the development of their domestic financial markets. The widening of the local banking base has been an essential complement to this policy. Foreign banks investing in the region have played an important role in a context of financial and banking liberalization. Most of those foreign banks brought a model based on retailing that fitted particularly well the need to strengthen the local financial base. The fact that many of the subsidiaries had to finance themselves locally – independently from parent institutions – also helped to promote financial inclusion among the population and contributed to reduce external vulnerabilities. Conclusions The economic and financial crisis in Spain and other euro area countries – with its particular mixture of international and domestic elements – has also brought important lessons in terms of financial stability. BIS central bankers’ speeches  3  One of them is the relevance of the macroprudential layer of supervision and the fact that having a good micro-prudential supervision is a necessary, but not sufficient condition to build a resilient financial system. There is the need for developing the framework and the tools to ensure that the macro perspective is duly taken into account.
Most colourfully was the observation, again made by Mervyn King, that an inflation target does not compel policymakers to behave like “inflation nutters”: there is scope to care about stabilising output and employment as well as controlling inflation.3 That monetary policymakers should be concerned with the implications of their actions for the real economy – for the growth of output and for the strength of employment – must surely seem right to all of us. The late Eddie George – who, together with Mervyn King, perhaps did more than anyone to cement the importance at the Bank of England of low and stable inflation – stressed repeatedly that low inflation “is not an end in itself .... [it is] a necessary means to the end of sustainable growth of output and higher living standards”.4 It’s important that we don’t lose sight of this overriding aim. Eddie was equally clear that, in the long run, the best contribution that monetary policy could make to achieving a prosperous and vibrant economy was to deliver enduring price stability. He had seen at first hand the pernicious costs of the high and variable inflation of the 70s and 80s: companies and households unable to budget and plan efficiently; resources misallocated; long-term contracts avoided for fear that large swings in inflation would end up biting one party or the other. The value of hard-earned savings eroded.

The suggestion made in some quarters that the MPC has slavishly followed the inflation target in recent years – that it has been fixated with inflation at the expense of growth and employment – is simply at odds with the facts. Based on the MPC’s central projection for inflation published last month, over the decade to the end of 2015, CPI inflation will average close to 3%. It will have been above its 2% target for 90% of that time, and above 3% for 40% of the time. Yes: some of this might be the result of poor forecasting. But much more important was the recognition that a lower profile for inflation was possible only by tightening monetary policy at the cost of an even deeper recession and an even larger rise in unemployment. Monetary policy has been on the frontline in supporting our economy through the financial crisis and it continues to be so. Indeed, it is striking that while some criticise the MPC for focussing too narrowly on inflation, others argue that we’ve worried too much about the real economy and taken our eye off the inflationary ball. “Is the MPC’s job to hit the inflation target or not”, they ask? Has the inflation target become a sham? The remit given to the Monetary Policy Committee makes clear that our job is to hit the 2% inflation target.
For emerging economies such as most SEACEN members, it is even more challenging in light of data limitations and continued structural changes that are taking place in our markets, particularly the proliferation of new financial products that consumers are less familiar with, and are less able to manage risk because of market limitations in terms of the availability of hedging instruments. This type of situation, if not properly monitored and supervised, can lead to a build-up of financial vulnerability and risks, for example in consumer finance, real estate, and the housing market. Therefore, supervisors need to work closely with their counterparts in the monetary policy wing to monitor and assess possible risks. The timeliness of this seminar is all the more important in light of the on-going developments in the global financial markets. Global imbalance between economies continues to be an important underlying risk upon which more financial market volatility can emerge. Linked to this, the geopolitical risk and oil price uncertainty, as well as the volatility emanating from the sub-prime mortgage markets in the US, could also bear down on the prospect of global growth. Against this backdrop, emerging markets in Asia have experienced large and volatile capital flows with important implications for currency and for domestic financial conditions. Going forward, the combination of volatile financial markets and downside risk to global trade and growth could have implications for the region’s growth and inflation outlook, as well as for credit and market risk for our financial institutions.

There was, moreover, no departure from the Bank’s prudent approach to reserve management and the reserves remained well above the minimum statutory level. This was the case even during periods of rising international oil prices, which inflated the import bill, and in 2007 when the public started to convert Maltese lira holdings into euro and to hold on to euro earnings in anticipation of the change to the euro. Another favourable element during the ERM II phase was the comfortable surplus position on the capital and financial account, which more than offset the current account deficit. A combination of substantial inflows of FDI and inward portfolio investment flows provided strong support to the Maltese lira. The Central Bank of Malta’s credibility - based on its track record in delivering exchange rate and price stability - as well as the small size of Malta’s financial market probably also helped to ward off any unwanted attention. The absence of volatile short-term capital flows into and out of the country during this period supports this impression. Finally, Malta’s experience points to the importance of a shared vision between the government and the central bank on policy objectives, as well as of a holistic approach to achieving them. In this regard, the continued acceptance by economic operators of the need to support the fixed exchange regime facilitated the authorities’ task in imposing the fiscal and monetary discipline necessary to meet the nominal convergence criteria.
While we welcomed greater engagement of emerging economies in the global regulatory reform process, such as in Basel Committee and various working groups, the key success factors are these: First, our inclusiveness at the policy development stage rather than just implementation stage, and secondly, on the inclusiveness in the supervisory colleges of global banks which are systemically important to our domestic financial system. Ladies and gentlemen, In closing, I would like to iterate that, the success in meeting these challenges, rests as much with us, as with the banking sector. Thus far, we are pleased with their efforts in strengthening risk management, not only in the process, but more importantly, the culture. Often, we are asked why our banking system has managed to remain resilient, while those with more sophisticated risk management system have suffered. I believe the key is, first of all, there is no gap between the risk profile of our banks and their risk management system, as well as our risk-based supervision. Our banks business model is less complex, mobilizing local and stable deposit, for on lending to domestic borrowers, with small investment portfolios, mostly in plain vanilla Thai government bond. They have very little exposure to less familiar risk such as overseas assets and complex products. But looking ahead, things will not stay this safe if both banks and the Bank of Thailand do not work closely to continuously strengthen risk management.

Meanwhile, NPL and delinquency have continued to decline, as the ratio of NPL, net of provisions, to total loans has declined further to 2.7 percent as banks attentively monitored their asset quality. Moreover, profit continued to be recorded for nine consecutive years, and the overall capital position of the banking system strengthened further, with BIS ratio at 16.1 percent, of which 12.6 percent is Tier 1 capital. Much of the current strength and resiliency of our banking sector owes a great deal to the reform groundwork laid during the past decade. On prudential supervision, as apart from requiring banks to conform to international best practices on risk-based supervision under Basel I and now Basel II, the Bank of Thailand also moved to strengthen our supervisory function, utilising both on-site and off-site supervision as well as asking banks to carry out stress tests on a regular basis. The key here was to strengthen banks’ own risk management culture and system. Works on strengthening the financial infrastructure were started and are still on-going. In this regard, various initiatives were introduced, including the long-term effort to reshape the financial system, and address inherent structural weaknesses, that was the mission of the Financial Sector Master Plan Phase I. The establishment of the National Credit Bureau to improve credit information, and improvements in financial legislations, including the new Financial Institutions Business Act, the Bank of Thailand Act and the Deposit Protection Agency Act. Today, our banking sector fundamentals continue to be strong, serving as a dependable pillar for our economy.
It is a shame that the Banking Union (BU) edifice is not quite complete and that we still need to shore up the European institutional framework with a deposit insurance scheme with full European backing. We also need greater regulatory homogenisation, in sensitive areas such as money laundering, fit and proper and insolvency. Developments in the regulatory framework Naturally, the prudential regulatory framework defined by the Basel Committee on Banking Supervision (BCBS) also bears little resemblance to what was in place prior to the financial crisis. As you are aware, the changes affected all the elements that define the capital ratio. Following the introduction of Basel III: (i) the numerator´s capital is calculated according to a new, more demanding definition; (ii) the denominator reflects banks´ risks more conservatively, having translated them into weighted assets; and, finally, (iii) the ratio level demanded has increased considerably, including additional “buffers” which, inter alia, cover the risk posed by systemic institutions. Other complementary metrics have been added to the classic solvency ratio, relating to banks’ liquidity or leverage, and discretionality in the use of internal models, has been limited to reduce procyclicality and prevent excessive variability in the calculation of requirements. All these improvements have been gradually introduced. In Spain the process has run in parallel with the correction of the overcapacity, that the sector had when the financial crisis broke, and with the ongoing clean-up of non-productive assets. The efforts made by the sector have been most considerable, greater even than the charts show.

Such long-term commitments to ASEAN will not only contribute to mutually reinforcing regional growth, but will become an important source of stability to the region. Conclusion Let me now conclude my remarks. There is less than three years to achieving the 2015 ASEAN aspirations. While many challenges remain, ASEAN is well positioned to collectively strive ahead towards the shared vision of a one ASEAN market. The financial industry has an important role in realising this vision, through its market conduct, business strategies and participation in domestic and regional collaborative initiatives. This conference provides an excellent strategic platform for the ASEAN industry to come together, share ideas and develop a greater understanding on the important issues towards building a stronger foundation for sustainable growth in ASEAN. On that note, I wish you an engaging and productive conference. 4  BIS central bankers’ speeches
With regard to nominal exchange rates, it is a matter of some satisfaction that none of the NMS participating in ERM II have experienced undue volatility since their entry into the Mechanism. This to a large extent confirms the appropriateness to date of the chosen central parity rates. It is also a reflection of positive market sentiment. The long-term interest rate is another important indicator of the suitability of economies to participate in ERM II and eventually adopt the euro, as it reflects the judgement of the financial markets regarding  9  4  Busetti et al (2006)  BIS Review 53/2006  the credibility of this process. All the NMS that are in ERM II currently satisfy this criterion, having achieved a consistent track record of downward trends in long-term interest rates over the past five years. Conclusion In conclusion, I think it is important in this case to look to the future with an eye on the recent past, and recognize that the ten NMS have come a long way in honouring their commitments to achieve the established macroeconomic targets and implement significant structural reforms, often against heavy odds. The magnitude of this undertaking must indeed be viewed not only in terms of the difficulty of the task itself, and the economic and social costs involved, but also against the background of an unfavourable global environment. At the same time they have striven hard to narrow the gap in living standards between themselves and the euro area member countries.

In this regard, the challenge would seem to be to strike a balance between, on the one hand, ensuring transparency and a level playing field and, on the other, giving due weight to the track record of economic policy and performance in the NMS, as well as to the implications for these  8  Schadler et al (2005)  BIS Review 53/2006  3  countries, and indeed for the euro-area as a whole, of an unduly rigid interpretation of the provisions of the Treaty. The application of the Maastricht criteria In making this point I am clearly not suggesting, as some academics have done, that the Maastricht criteria are “neither necessary, nor sufficient”. On the other hand, there are some aspects of the criteria that could legitimately be the subject of reflection. The calculation of the reference value of the inflation criterion is a case in point. Over the past few years there has been a debate about how one should define “best performance” in relation to inflation and also about the term “outlier”. And even about why countries outside the euro area should be included among the best performing countries. This debate appears to have resurfaced again during the preparatory phase of the current ECB Convergence Report. Another, and currently very topical aspect that also has ‘level playing field’ connotations is the impact of the ongoing spike in the international oil price.
Ardo Hansson: Working together for the good of the EU and Estonia Opening speech by Mr Ardo Hansson, Governor of the Bank of Estonia (Eesti Pank), to the Ragnar Nurkse Lecture for the 95th Anniversary of Eesti Pank, Tallinn, 4 November 2014. *  *  *  Professor Balcerowicz, President of the Riigikogu, Chair of the Supervisory Board of Eesti Pank, Excellencies, Ladies and Gentlemen, Thank you for being here today to mark the 95th anniversary of Eesti Pank and to honour Ragnar Nurkse, the world's best-known economist from Estonia to date. Eesti Pank was founded when the Republic of Estonia was only a year old and Ragnar Nurkse was a model eleven-year-old pupil at the Tallinn Cathedral School. In the words of Juhan Kukk, the Minister of Finance of the time, founding Eesti Pank as the issuer of the national currency and tying the currency to gold showed the same great “bravery and belief in national and economic independence” as engaging in the War of Independence did. Ragnar Nurkse started his studies in the University of Tartu, but he soon moved to continue them in the School of Economics of the University of Edinburgh and later in Vienna. He was recognised in his home country for his work, as is shown by the worried letter that Jüri Jaakson, Governor of Eesti Pank at the time, sent him in spring 1938. Nurkse was working in Geneva at the time for the League of Nations, the forerunner of the United Nations.

Eesti Pank concentrated on stabilising the economy and on earning and maintaining confidence in the Estonian currency. Today the European Union and its member states are Estonia’s main partners both economically and politically. Working together with the European System of Central Banks has become a matter of course for Eesti Pank, be it in monetary policy, financial stability or economic analysis. We are in an unprecedented position to engage in defining the economic world around us, and our input is listened to. Evidently there are limits on how much a small country can contribute in the functioning of the European Union, because smaller countries have fewer resources. But we can widen  BIS central bankers’ speeches  1  those limits by making the best use of our resources, by learning from our own experience and that of our partners, and by working well together. Working together is particularly important right now, at a time of geopolitical tensions in and around Estonia and of deepening insecurity. It is right now that we need to find the ideals, the ideas, and the goals that can bring us together, and we must work together to achieve them. I wish us strength and good luck in all of this. Thank you again. 2  BIS central bankers’ speeches