samchain/econo-pairs-v1 huggingface dataset:
A single regulator Alongside this macro framework, there was a consensus that industry and commerce was best left to the market with market failures and externalities controlled by independent regulators, like OFGEM, OFCOM and OFWAT, rather than through ownership. In the case of the financial services sector, responsibility was given to the FSA and banking supervision moved out of the Bank. The new FSA inherited from the Bank an approach to prudential supervision in particular which was based as far as possible on principles rather than a detailed rule book . There were positive and negative reasons for that move. The positive were that a single financial regulator would be more effective at a time when the lines between banking, insurance and securities dealing were breaking down. It was efficient for the firms to have just one regulator to deal with and good for the regulator to be able to look at all aspects of their business. On the negative side there was a worry that responsibility for supervision even of banks could unbalance the Bank and distract it from its monetary role. So while the Bank retained a role in promoting financial stability and monitoring the vulnerabilities in the system as a whole, it was not given any statutory objectives or powers in the new legislation. This piece of the UK system was controversial in some quarters but it definitely topped the international best buy tables in 2006.

In particular, the models cannot deal easily with self reinforcing movements away from equilibrium. What at first glance can look like a series of unrelated unexplained disturbances to the variables in the model, could actually reflect some common economic impulse that is not captured by the model. Whether those shocks die away, persist or even build – and therefore how misleading the forecasts that the model produces are – will depend on what’s missing from the model. In fact the areas of the economy which the current generation of models do not cover well include the areas where the imbalances were building up in recent years. The treatment of financial markets and their interaction with the real economy is little more than a side-show. Banks are typically absent altogether. Yet experience has shown that financial markets are particularly prone to these self-reinforcing movements away from equilibrium. We have seen in the last few months alone many examples of that. For example we have seen coordinated sales of assets depressing prices, leading to write-downs on portfolios throughout the system, which in turn have triggered a further wave of selling. These features generally prevented these models from “joining up the dots” in the last upswing and from capturing the impact of tightening credit conditions in the downswing. I should emphasise that the MPC is not a slave to any one model. The current Governor reminds us frequently that: “It is vital never to confuse the world with a model.
Faced with a demand shock – such as an exogenous increase in consumer spending (for example driven by a change in preferences) – inflation and output would be pushed in the same direction. The monetary  3  For example, policy rates in the United States were being cut well before those in the UK. BIS central bankers’ speeches  3  policy prescription in such cases is relatively simple – monetary policy just has to lean against the demand shock sufficiently that inflation returns towards the target. Tightening policy helps to reduce the deviation of both inflation (from target) and output (from its sustainable path) albeit with somewhat different time lags. For such a shock the challenge for the policy-maker is one of recognition and timing (because demand will usually react more quickly than inflation to a policy change) rather than direction. Things are much, much more complex when faced with real, relative price shocks, such as a rise in world energy prices. Such a cost shock pushes up on inflation but simultaneously pushes down output relative to its previous level. Technically it is a negative supply-side shock. That makes policy-making much more difficult – one can only counter the resulting inflation by exacerbating the fall in output. Moreover, the pressure of demand on inflation becomes much harder to estimate when both actual output and the level of sustainable supply are moving around at the same time. The three price shocks share a common feature – they all represent real shocks to relative prices.

Philipp M Hildebrand: Liquidity - a challenge for banks Public lecture by Dr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, at the Swiss National Bank Conference “Liquidity - a challenge for banks”, Zurich, 11 January 2005. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  The resilience of the international financial system has been strengthened in recent years thanks to the extensive efforts of financial institutions, central banks and regulatory bodies. Nonetheless, given the steadily increasing volume of transactions in global financial markets, securing liquidity remains a fundamental task for banks. During times of crises, liquidity can suddenly contract or dry up altogether. The challenge for banks is to set up liquidity planning procedures to secure reliable liquidity sources for exceptional circumstances. Liquidity risks must be correctly assessed and assets must be secured to serve as collateral when necessary. In Switzerland, the repo market is the forward-looking liquidity management instrument for the banks. It minimises counterparty risk in lending and provides access to a crisis-resistant, collateralised interbank market. The Swiss National Bank is itself a participant in the repo market. It uses the repo platform to implement monetary policy and to provide for liquidity in both normal and exceptional circumstances. BIS Review 1/2005  1
Eva Srejber: Experiences from the cash changeover in the euro area Speech by Ms Eva Srejber, Second Deputy Governor of Sveriges Riksbank, at a meeting of the Swedish Federation of Trade, Stockholm, 9 April 2002. *  *  *  Let me begin by thanking you for the invitation to come to the Swedish Federation of Trade's meeting to speak about the cash changeover that has taken place in the twelve countries now participating fully in the third stage of EMU. The changeover from national banknotes and coins to euro has gone much more quickly and been more problem-free than expected and now the euro is an established currency in the countries concerned. The cash changeover was a major challenge for these countries, as the volumes were so extensive and the time period for the changeover was relatively short. Almost 15 billion euro banknotes and 50 billion euro coins were to be distributed, and at the same time all of the national banknotes and coins were to be withdrawn to the central banks. The logistics and security for the changeover therefore had to be specially designed and extra capacity was required. However, the most important factor in making the changeover a success was the enthusiasm of the general public and the naturalness demonstrated by banks, the retail trade and other institutions handling cash when carrying out their work.

This has been the focus of considerable discussion, particularly in Finland, as there they have chosen to continue their practice of rounding-off and to round off cash payments to the nearest five cents, something we would probably also do in Sweden if we adopt the euro. Eurostat's euro indicator for January 2002 shows that the price level in the euro countries rose by 0.5 per cent between December 2001 and January 2002. However, this is not considered to be caused primarily by the cash changeover - the effect of this is estimated to be somewhere in the interval of  2  BIS Review 23/2002  0.0-0.16 per cent. The Bank of Finland has not yet made a complete analysis of how large an effect the cash changeover has had on prices, but the figures for the month of January give no indication of inflationary pressure from the price rounding-off. However, there have been reports from the Netherlands of some effects on inflation. In a number of other countries (e.g. Greece, France and Ireland) the authorities have been keeping a very close watch on price increases and are working to counteract them. Naturally, there are a large number of other experiences from the introduction of the euro that could be mentioned in this context, and the Riksbank is working on a compilation of the information we have received from other central banks in the euro area. This compilation will be presented in the next progress report from the SIFS group (no.
They are associated with the fact that expanding demand in many industries exceeds their potential to ramp up output and imports. This accelerates price growth as well. As to the product groups where prices rose the most in the second quarter, these are construction materials, furniture, and cars. When people expect prices to rise faster, they decide to make large purchases earlier. To do this, they use both savings and borrowings. Growth in consumer lending again sped up to a quite high rate, which was driven by accommodative monetary policy, among other things. On the other hand, accommodative policy lowered the demand for bank deposits, especially given accelerated inflation. There are also other markets where price growth was rather caused by one-off factors and limited supply. This is tourism, for instance. Only a part of foreign destinations have been reopened, whereas Russian resorts’ infrastructure is still insufficient to accept the entire tourist flow. As a result, prices for tourism services soared, which also sped up inflation in June. Furthermore, May—June recorded a surge in prices for such vegetables as cabbage, potato, carrot and beetroot, which was because 2020 harvest stocks started to end before the new harvest supply. However, the contribution of such one-off factors to overall inflation is smaller than that of steady factors. The increase in prices for these everyday products is very noticeable and significantly impacts inflation expectations.

The yield curve of federal government bonds, which is used by banks as a benchmark for the interest rates they set for their clients, has significantly increased for maturities of up to three years, while staying almost unchanged in the long end. The rise in short-term yields reflects both our recent decisions and market expectations regarding the future key rate path. Shifts in long-term yields are minor. Among other things, this is an evidence of market participants’ confidence that monetary policy will finally bring inflation back to the target. I would like to reiterate that these are long-term interest rates, rather than our key rate as such (as is often stated), that determine the affordability of credit for companies’ investment purposes and of mortgage loans. As compared to yields on federal government bonds, interest rates on loans and deposits have responded more slowly and rose less significantly. Our today’s decision is aimed at accelerating this process. An increase in interest rates will help restore households’ propensity to save. Growth in retail and corporate lending is close to its highest rates recorded in recent years. Many borrowers seek to take out loans as soon as possible at lower interest rates. We have raised our lending growth forecast for this year. Mortgage lending will continue to expand fast, while slightly decelerating after the amendments to the subsidised mortgage lending programme become effective. Speaking of unsecured consumer lending, we can already observe the first signs of overheating. This lending segment has been growing faster than we forecast in April.
Such comforts were viewed by many as a shield against underlying risks, and in some cases they prompted banks to lower their guard against the problems that were gathering. Given the new playing field in place as from 2007, the responsibility of savings banks is clear: to act resolutely to change those structures that can be improved, in full awareness that other parts of the new situation are exogenous and therefore elude their management capabilities. Hence the importance of taking decisions aimed at improving efficiency, through merger – or concentration – processes that position savings banks at a new set of size and rationality-based coordinates. BIS Review 173/2010  1  Faced with this need, the structuring of the new IPS instrument (new, at least, in terms of its current contours) responds to the need to pave the way so that concentration agreements may be reached between a type of institution –savings banks – which, given its business form and complex governance arrangements, does not have the same flexibility as banks to conclude merger agreements. To smooth these concentration processes, the Fund for the Orderly Restructuring of the Banking Sector was also created, a Fund to which the initiators of the various projects can resort to strengthen their capital. This assistance adds further discipline in respect of compliance with the plans, since the condition imposed by the use of public funds is that the capacity of the banking system should be reduced and its efficiency increased.

  Last, but not least, the Basel Committee has improved the effectiveness of supervision by upgrading its Core Principles and by strengthening the supervision of systemically important banks. Many of these new rules are now in place and we can say that banks are more resilient now than in 2009. But different weaknesses persist. For this reason, the Basel Committee is undertaking a review of the capital framework that will be finalised by the end of 2016. In particular, the methodologies used to measure banks’ risks are being reviewed, both under the standardised approaches and under internal models. The standardised approaches are being revised to incorporate the lessons learned from the crisis so as to increase their risk sensitivity without, however, making them unduly complex. Regarding the internal models, they have been criticised because of their lack of comparability, the variability of the resulting risk-weighted assets, and their complexity and lack of transparency. These, let’s say, “faults” have undermined the credibility of capital ratios. Therefore, the Basel Committee is considering including several constraints on internal models in order to strike a better balance between simplicity, comparability and risk sensitivity. The other remaining major challenge is calibration. Basel III has changed the prudential setting quite significantly. The days when there was a single metric (the risk-weighted capital ratio) are over. We now have several prudential measures that will most probably be interacting in different ways.
In the Eurozone, despite progress in the financial and banking industries – as revealed by stress tests – credit growth is still slow and a sharper deceleration is a latent risk. All these risks in the external scenario could trigger new episodes of volatility in world financial markets, with important negative effects in credit costs and output. They could also result in an additional depreciation of emerging currencies – our peso included – affecting the short-term inflation outlook. On the bright side, it is possible for the oil price to have a stronger than forecast effect on both external and internal activity, either because the effect of a reduction is greater than assumed in the baseline scenario, or because the drop is steeper. Locally, one risk has to do with output, but especially with domestic demand dynamics. Prospects for recovery have been postponed time and again, while the possibility of true recovery has lost strength. The baseline scenario assumes that business and consumer confidence will improve gradually. If not, the slowdown in spending and output may become persistent and translate into longer-lasting capacity gaps and reduced inflationary pressures. It cannot be ruled out that the current size of gaps – an unobservable variable with quite an uncertain measurement – turns out to be smaller than estimated and thus contributes less than expected to slowing down inflation. Low unemployment and strong growth in nominal wages put a note of caution in the evaluation of inflation dynamics.

Nonetheless, higher prices are temporarily weighing on household purchasing power and we must remain vigilant. Sud Ouest: Might the speculative attacks on the some countries’ sovereign debt and concerns over the euro’s future dampen consumption and investment? Christian Noyer: No, there are no grounds for concern. Europe has shown over the past few months that it is capable of rallying together and providing effective and innovative solutions for countries that fall prey to speculative forces. Sud Ouest: But it is evident that this is not enough to deter investors from attacking the sovereign debts of some countries… Christian Noyer: At present, these attacks are centred on the countries of Southern Europe. Markets tend to tar with the same brush all the countries perceived as the most fragile in the euro area, whereas their situations differ considerably. The sovereign debt dynamics of some non-European G7 countries are more worrying that those of many euro area countries. Sud Ouest: Aren’t speculators betting on a break-up of the euro area? Christian Noyer: By definition, this scenario is totally ruled out: no country is willing to consider this option since it would have an astronomic cost for all euro area countries, the strong and the weak alike. Sud Ouest: Won’t the fiscal austerity measures imposed on euro area countries that have benefited from EU-IMF loans have exorbitant social costs? Christian Noyer: They may be hard to bear. But it would be unrealistic to think that growth and purchasing power can be lastingly sustained if public deficits continue to rise.
The exchange rate was therefore no longer suitable as a nominal anchor. A little less than two years ago, the Storting and the Government adopted new guidelines for economic policy. According to the mandate, Norges Bank shall orient monetary policy towards low and stable inflation. The inflation target is set at 2.5%. The introduction of new guidelines for economic policy in March 2001 and the conduct of fiscal policy have altered the interplay between economic policy components. In the past, growth in public spending was to be reduced or other fiscal policy measures implemented if the labour market was tight and wage growth high. With today’s guidelines, it is primarily monetary policy that is tightened in a similar situation. The rise in labour costs is important when Norges Bank assesses the inflation outlook and sets interest rates. Excessive wage growth, in both manufacturing and other industries, will affect the internationally exposed sector through two channels. First, high wage growth will in itself reduce earnings and employment. Second, the interest rate will be increased. Normally, this will lead to an appreciation of the krone, with a further reduction in earnings and employment. The manufacturing sector will therefore feel the effects of excessive wage growth to an even greater extent than earlier. Since the new fiscal guidelines, which entail an increased use of petroleum revenues, were introduced during a period with a tight labour market, it was to be expected that the krone would be strong at times.

However, after more than nine months, I think it is already possible to draw first conclusions in three main areas: -  First, the close co-operation between central banks on the one hand and between the supervisory authorities and central banks on the other hand seems, in my opinion, to be a determining factor for efficient crisis management. This point was indeed underscored during the recent work carried out by the Financial Stability Forum. I must say in this respect that the French model of banking supervision, in which banking supervisors have close ties with the central bank, has once again proven its worth in the current context. The necessity of this proximity has also been  BIS Review 78/2008  3  increased by the new accounting and prudential standards which have proven to be pro-cyclical and in which liquidity and solvency are intertwined. In this context, when in a financial crisis, it is crucial to cross-check, at every moment, information on the evolution of banks balance sheet and data on money market functioning in order to assess the risks to financial stability. Such an assessment enables to adapt, as far as needed, the refinancing policy of the central bank, in order to alleviate tensions in the market; those tension being a threat both to financial stability and to the effectiveness of the transmission of monetary policy.
Chart 3: Consumer confidence and spending 10 Percentage change on 19Q4 5 Retail Sales (LHS) 0 -5  Headline Consumer Confidence (RHS)  Percentage point difference on 19Q4  Chart 4: UK Misery Index  10 5  Misery index  16  Forecast  14  0  12  -5  10  -10  -10  -15  -15  8 6 4  2022  2020  2018  2016  2014  2012  2010  2008  0  2006  -25  2004  -25  2  2002  -20  2000  -20  Sources: GfK/EC, ONS. Sources: ONS and Bank calculations  Notes: Headline consumer confidence is based on the  Notes: Index is summation of the unemployment rate and  average of five survey balances: general macroeconomic  inflation rate. Forecast is based on projections in Aug 2020  situation over the past 12 months and expectations for the  Monetary Policy Report. next 12  If the public do have an exaggerated sense of the risks they face, what might be its source? Psychological studies suggest it may reflect behavioural biases inherited from our hunter-gatherer past. Humans tend to over-estimate systematically risks that are systemic or existential to lives and livelihoods.4 This “dread risk” causes excessively cautious behaviour, sometimes with harmful side-effects – as when the exaggerated fear of flying after 9/11 caused more people to drive.5 These exaggerated risk perceptions are often amplified by others’ words and actions. Caution is contagious.

Avoiding Economic Anxiety Speech given by Andy Haldane Chief Economist and Member of the Monetary Policy Committee (MPC)  Cheshire and Warrington LEP Economic Summit Webinar 30 September 2020  The views expressed here are not necessarily those of the Bank of England or the Monetary Policy Committee. I would like to thank Jack Meaning and Andre Moreira for their help in preparing the text. I would like to thank Andrew Bailey, Frances Cassidy, Alan Castle, Shiv Chowla, Liam Crowley-Reidy, Jon Cunliffe, Harvey Daniell, Pavandeep Dhami, Simon Hayes, Saurav Kamath, Zaar Khan, Simon Kirby, Nick Mclaren, Becky Maule, Shahid Nazir, Mette Nielsen, Douglas Rendle, Michael Saunders, Michal Stelmach and Jan Vlieghe for their comments. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  Thank you for the invitation to speak at this Cheshire and Warrington Local Enterprise Partnership (LEP) Economic Summit. Through my colleague on the Industrial Strategy Council and former Chair of the LEP, Christine Gaskell, I know the excellent work the LEP does in supporting the local economy and community. That support has never been more important given the risks facing individuals, businesses and communities. Given those risks, I thought I would focus today on the economic outlook in the UK, updated in the light of events since the publication of the Bank’s Monetary Policy Report in August. Plenty has since happened. But one factor has remained the same: the extra-ordinary degree of uncertainty about the economic outlook.