samchain/econo-pairs-v1 huggingface dataset:
Meanwhile, the amount of money that households need to service their debt (for mortgages, cars, credit cards) has fallen sharply to levels that prevailed during the mid-1990s. Debt service has been pushed lower by a combination of debt repayment, refinancing at lower interest rates and debt write-offs. Financial institutions have strengthened their balance sheets by retaining earnings and by issuing equity. Bank lending standards, while still tight, have begun to ease somewhat. As a result, some measures of bank credit are beginning to expand again. Second, monetary policy and fiscal policy have provided support to the recovery. On the monetary policy side, we at the Fed have maintained unusually low levels of short-term interest rates and engaged in large-scale asset purchases. These measures have fostered a sharp improvement in financial market conditions. On the fiscal side (that is, government spending and taxation), the economy has been supported by the shift in policy to help support growth. In particular, the temporary reduction in payroll taxes could have a strong impact on growth during the first part of this year. Third – and very much linked to the topic of this meeting – is growth abroad. Much of the rest of the world – especially the emerging market economies – have been growing strongly. This growth has led to an increase in the demand for U.S.-made goods and services. Over the four quarters of 2010, real, or inflation-adjusted, exports rose 9.2 percent. All told, real exports accounted for about 40 percent real GDP growth in 2010.

Moreover, the extra exposure to any single country that the Eurosystem might acquire as a consequence of OMT activation would be secured by the country’s strict obligations arising from the European Stability Mechanism (ESM) macroeconomic adjustment programme to which the country would have to submit as a precondition. It is worth noting that in June 2015 the European Court of Justice ruled that, given the strict modalities for activation, OMTs fall within the scope of the ECB’s mandate and include sufficient safeguards to avoid monetary financing. A number of safeguards apply to public sector bond purchases under the PSPP too. Such purchases have a monetary policy purpose which is different from the one that applies to OMTs and are specifically aimed at bringing inflation back to our medium-term objective in a situation in which our key interest rates are at levels that can hardly be reduced much further. The modalities are exclusively governed by the primary objective of price stability and are decided in full independence, irrespective of developments in other policy areas. The size and duration of the PSPP are calculated to achieve progress towards the ECB’s inflation objective. The effectiveness of the tool is rooted in two important features of the financial system. First, government bond yields are the benchmark indicator for pricing a large set of private debt instruments. Second, government bond markets are deep and liquid. Interventions in these markets can initiate a process of portfolio rebalancing with significant secondary effects on broad financing conditions.
The baseline scenario assumes that inflation will be temporarily above 4 percent and will return to 3 percent over the course of 2015. This will partly be the result of the economic slowdown of recent quarters will give way to lower inflationary pressures going forward. There are risks, however, as it is difficult to gauge the actual sizes of output gaps and sales margins. For instance, the labor market is still tight by historical standards and relative to the recent evolution of GDP, which could influence the inertia and sensitivity of nominal wages to actual inflation. However, other labor market indicators, such as the behavior of salaried employment and vacancies suggest that gaps are also building up in this sector. A second risk in the domestic economy has to do with the poor performance of investment over the past few quarters. Although the baseline scenario assumes a slight recovery in the near future, the inherent inertia of this component may prolong said poor performance beyond forecasts. As a matter of fact, from last September to date the projection of annual investment growth in 2014 has been revised downwards by more than 5 percentage points. The Financial Stability Report Our Financial Stability Report (IEF) discloses semiannually (every June and December), the recent macroeconomic and financial developments that could affect the financial stability of the Chilean economy. Let me now give you a brief description of some of the main topics covered in this issue of the Report.

Inflation has varied slightly more in the past few years. In a period of increasing cross-border labour flows, substantial technological advances, changes in competitive conditions and new trading patterns, we may, with our very open economy, have to accept a somewhat greater variation in inflation and deviations from the target, as we have witnessed over the past two to three years. An overall assessment implies that the interest rate in the baseline scenario gradually increases to a more normal level. The projections are based on the assumption that interest rates in Norway and abroad will rise somewhat faster than may be implied by today’s forward rates. Since the previous Inflation Report, the upward movement in Norwegian and international long-term interest rates has become more pronounced. Exchange rate movements are difficult to project. In Inflation Report 1/06, the path for the interest rate in Norway and abroad was assessed to be consistent with an approximately unchanged krone exchange rate. The high rate of economic growth implies that price and cost inflation will edge up after a period. Inflation measured by the CPI-ATE is projected to increase from today’s level of around 1¼ per cent, up to almost 2 per cent at the end of 2007. There are prospects that inflation will increase further and be close to the target of 2.5 per cent three years ahead. With a gradual reduction in unemployment, Norges Bank expects wage growth to edge up.
That recovery is assisted by the continued support the MPC is providing through low interest rates and quantitative easing, and in my view it amply justifies our current stance on monetary policy. But let me dwell for a moment on three important elements of the MPC’s decisions. First, we will continue to execute the announced programme of asset purchases, which we expect to be completed by around the end of 2021. Second, we have in place an important piece of forward guidance, which states that: “If the outlook for inflation weakens the Committee stands ready to take whatever additional action is necessary to achieve its remit. The Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably”. This guidance is a recognition of the scale of the shock, the high level of uncertainty and the risks around the Covid recovery, which are still on balance distributed on the downside, though less so as time goes by. It is deliberately state contingent, in other words it sets out that there is a burden of proof we will need on the sustainability of the recovery. But it does not deviate from the usual medium-term nominal anchor, the 2% inflation target. And in this context it is encouraging that measures of inflation expectations have remained relatively stable in the UK, despite the seismic shocks and unprecedented policy response we’ve experienced over the past year.

Online shopping has surged during the pandemic, accelerating a pre-existing trend. The latest retail sales figures indicate that it accounts for 35% of total sales, up from 20% in February last year. Online retailing has the potential to be more productive than through physical stores, and there is some evidence from the last decade of this already happening. Higher productivity growth in retailing has not been fully matched by higher wage growth, and this lower unit cost growth may have contributed to the relative weakness of domestic consumer prices in recent years (Tenreyro, 2020). Covid has also caused changes in consumer spending patterns. Much of this has been of necessity, but if some changes to consumer spending habits persist – for instance if tastes change – the pattern of production in the economy is also likely to change. The question is how will such a process of more structural change in the economy happen, and what will be the impact? What are the implications of the changes we are seeing in the economy? This is a very big question, so what follows is necessarily quite high level. The answer to the question is surrounded by a great deal of uncertainty, given the scale and speed of the shock that has caused the changes. Let me start with employment and the labour market. In normal UK economic cycles, falls in output are accompanied initially by relatively small falls in hours worked and then later by larger falls in employment.
Likewise important from the standpoint of the industry’s resilience has been the deleveraging undergone by the Spanish non-financial private sector during this period. From 2010 to 2019 there was a decline of almost 30 pp of GDP in the household debt ratio; and in the case of the non-financial corporations sector, its net debt fell by more than 45 pp of GDP from 2010. 1  In any event, the most appropriate means of illustrating the banking sector’s resilience is through the stress tests we regularly perform as supervisors. In July, the ECB conducted a vulnerability analysis of the banks under its supervision. The aim was to test, prospectively, banks’ resilience to the shock caused by the pandemic. The results of this exercise for Spanish banks are very similar to those obtained at the Banco de España in the Forward Looking Exercise on Spanish Banks (FLESB) stress test exercise, whose final results were published in our autumn Financial Stability Report. In the baseline scenario considered by the Banco de España’s vulnerability exercise, which includes cumulative declines in euro area GDP in 2020, 2021 and 2022 of around 1.6%, the reduction in the solvency of Spanish banks as a whole was estimated at 2 pp for significant institutions with an international presence, at 1 pp for other significant institutions and at 0.8 pp for institutions under the direct supervision of the Banco de España, leaving them at 9.9%, 12% and 18.7% on average, respectively, above the prudential requirements established.

14.01.2021  The banking industry and the challenges of the pandemic* Spain Investors Day Pablo Hernández de Cos Governor  *English translation of the original speech in Spanish  Good evening. Let me thank the Governing Board of Spain Investors Day and their President, Benito Berceruelo, for kindly inviting me to participate in the closing of the 11th edition of this annual international forum. As in previous years, it will undoubtedly contribute to enhancing Spain’s image and to promoting international investment in our country. Allow me also a brief comment on the content of my speech. As a member of the Governing Council of the European Central Bank (ECB), I am today subject to the so-called “quiet period” ahead of monetary policy decision-making meetings. Therefore, my thoughts may not be interpreted as indicative of the monetary or economic outlook. Against the background of the ongoing COVID-19 pandemic and its impact on the economy, I should like to talk today about the banking industry in Spain. The industry plays a crucial role in crisis situations such as the present one by providing financing to the productive sectors and to households. And, like other sectors in the economy, it has also seen the risks it faces as a consequence of the crisis rise. The current conjuncture has once again highlighted the importance of maintaining a healthy and resilient banking industry in the face of the various shocks that may arise.
More specifically, the energy component is the largest contributor to the surging trend of domestic headline inflation (with around 45% share of HICP). We expect that our domestic short-term inflation outlook will continue to remain, overall, at very elevated levels, similar to the euro area inflation developments, amid the ongoing significant uncertainty and volatility resulting from the war. More specifically, Cyprus HICP inflation for 2022 has been revised upwards in our most recent projections, now reaching 8,4 percent compared with 7,0 percent in the CBC June 2022 projections. Banking sector n this ever changing and uncertain economic environment, the Cyprus Banking Sector is proving resilient, exhibiting a solid and healthy financial standing. The solvency position, as measured by the Common Equity Tier 1 ratio was edging up to 17,5 percent in the second quarter of 2022, a level higher than the respective European average of 15,2 percent. The Liquidity Coverage Ratio, indicating the availability of liquid funds against deposit outflows over a 30 day stressed period, stood at the level of 320 percent in July 2022 which is more than 3 times higher than the minimum requirement of 100 percent, placing Cyprus amongst the most liquid banking sectors in the Union, where the average LCR amounts to 168 percent.

The Cyprus economy, continued to record noteworthy GDP growth, despite the outbreak of the war. Real GDP growth in Cyprus expanded by about 6 percent during the first half of 2022, mainly driven by a faster than expected recovery in tourism-related activities and, to a lesser extent, by growth in information and communication activities and in professional services. At the same time, weakness in the Cyprus GDP performance could be expected to become visible over the second half of 2022 and early 2023, primarily owing to the anticipated worsening in the international economic outlook. More specifically, the impact of the war is expected to be channelled directly, via the disruption in trade of services and the rise in commodity prices, as well as indirectly, via the impact on business and consumer confidence. Our exposure to Russia via the export of services is the most significant vulnerability, with the most important exposure relating to financial and other business services and, to a lesser extent, tourism and transport. 2/4  BIS - Central bankers' speeches  In terms of inflation, the Harmonised Index of Consumer Prices (HICP) reached 9,6 percent in August 2022 compared with 3,3 percent in August 2021. For the period January-August 2022, inflation climbed to 8 percent, compared to 1,2 percent in the same period in 2021. The spike in the domestic inflation is mostly attributed to the significant negative impact of the war, as well as the continued consequences of the pandemic.
For instance, the possibility was created to use the mechanism to recapitalise a banking system directly, without burdening the country’s national debt. In this way, the link between the banks’ and the country’s credit rating can be broken. When we met to decide on the repo rate on 3 July, it was uncertain what effect the measures would have and whether they were sufficient. Crisis management but persisting concern Personally, I found it difficult to evaluate the European Council’s agreement and the other decisions taken during the spring to improve the situation in the euro area. As I noted at the monetary policy meeting, it is necessary to assess what is going on from both a short-term and a long-term perspective. In the short term, we need measures that will quickly lift the euro area out of the acute crisis, so that credible solutions can be implemented to deal with the problems in Greece and Spain and to limit the contagion effects. Long-term measures are also needed to make the countries less vulnerable to future crises. Confidence in the euro and in the monetary union also needs to be boosted. This probably requires greater collaboration within the euro area on fiscal policy as well as banking supervision and the management of banks in distress, and such solutions take time.

Once the joint banking supervision facility in the euro area has been established, the idea is that the ESM will take over from the EFSF and the loan can be channelled directly to the Spanish banks. This will break the links between the crisis banks’ finances and the Spanish government’s finances. The European Commission has signalled that a proposal regarding banking supervision will be announced in early September. One condition for the ESM to be able to take over the loan is, of course, that the mechanism is actually activated. This requires approval from countries that together account for 90 per cent of the capital paid into the mechanism. At present, approval is yet  BIS central bankers’ speeches  3  to be given by Germany – which is awaiting a verdict from its constitutional court in mid-September. The Memorandum of Understanding regarding support to the Spanish banks makes it clear that the Spanish government is expected to carry on with its work on reducing its budget deficit to just below 3 per cent. The time limit they have been given to reach this has been extended by one year to 2014. Spain has given an account of its budget plans and the savings to be implemented to reach the target. During the summer the IMF has also given strong support to Spain’s efforts. Concern over the situation in Spain and Italy The market’s reactions to the agreement on banking support to Spain can be described as cautiously positive.
As a net importer of energy the sustained terms of trade shock to the UK from persistently high energy prices – and from the smaller but still significant increase in food prices and manufactured imports which also took place - has left the UK economy poorer. These price shocks have been the single biggest driver of the recession and very high inflation the UK economy is having to contend with. The ratcheting up in gas future curves has been a feature for most of this year (Chart 2). At the time of the August 2022 MPR the futures curve peaked at 450 pence per therm which would have implied average household energy bills of £ from October 2022, nearly three times higher than a year earlier. Although the futures curve has fallen back since and remains on a declining trend into the medium term, persistence has become more evident. Sources: Bloomberg Finance L.P. and Bank calculations. Notes: Spot price is the one-day forward price of UK natural gas. Latest futures curve as of cob 21 November 2022. Bank of England  Page 6  In the November 2022 MPR the MPC moved to adopting the full futures curve for its conditioning assumption for the forecast of energy prices. In November 2021, energy prices directly accounted for only 0.8% of the inflation forecast for 2022Q4 compared to a direct impact of 3.8% in the latest forecast (Chart 3). Sources: Bloomberg Finance L.P., Department of Business, Energy and Industrial Strategy, ONS and Bank calculations.

The 5yr5yr inflation swap, which was previously the reference measure, currently does not provide a good signal for inflation expectations as it incorporates both RPI and CPIH components. Bank of England  Page 9  while this latest trend is encouraging it remains well above its long run average, and further above its average than the equivalent measure for the Euro area (Chart 6). Sources: Bloomberg Finance L.P. and Bank calculations. Notes: Five-year inflation, five years ahead and two-year inflation, five years ahead, derived from swaps. The instruments are linked to the UK RPI, US CPI and euro-area HICP measures of inflation respectively. UK RPI is due to be aligned with CPIH from February 2030, which will affect the pricing of the UK five-year, five-year measure. Since 2000, annual CPIH inflation has averaged 90 basis points lower than RPI inflation. In a higher inflation environment, some research has found that the distribution of inflation expectations can also matter. Views differ about the salience of this kind of historical research for the UK’s current situation but it does suggest that during periods of high inflation, such as those experienced in the US in the 1970s, the change in the standard deviation and skew of expectations in survey results might signal risks to a de-anchoring of inflation expectations, even if the median doesn’t change9.
We look forward to hearing your views. Why achieving net zero requires action from everyone, including central banks 2020 was a global catastrophe. 3 million lives tragically lost to Covid.2 The worst decline in output since World War 2 globally, and the Great Frost of 1709 in the UK.3 Working hours slashed by the equivalent of 255 million jobs.4 And children’s education cut by at least a quarter.5  Even hardened optimists would struggle to find a silver lining in all of that. But, unintentionally, 2020 did achieve at least one extraordinary thing: it showed us just how big the challenge of tackling climate change  1  Sesame Street: It's Not Easy Being Green (Kermit's Song) - YouTube WHO Coronavirus (COVID-19) Dashboard | WHO Coronavirus (COVID-19) Dashboard With Vaccination Data https://www.imf.org/-/media/Files/Publications/WEO/2021/April/English/Ch1.ashx and https://www.bankofengland.co.uk//media/boe/files/statistics/research-datasets/a-millennium-of-macroeconomic-data-for-theuk.xlsx?la=en&hash=73ABBFB603A709FEEB1FD349B1C61F11527F1DE4 4 wcms_767028.pdf (ilo.org) 5 https://www.imf.org/-/media/Files/Publications/WEO/2021/April/English/Ch1.ashx 2 3  2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  really is. Last year, as a result of all of that turmoil – air travel down by two thirds;6 road miles halved7 – global fossil CO2 emissions fell by 7%.8 That may not sound like much. But it’s the biggest fall for over a century (Chart 1).

19  10  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  10  Setting a target for the overall climate properties of the portfolio will help shape and steer our investment decisions, and provide transparency and accountability. At first sight, the framing of this target seems obvious: to achieve net zero by 2050. But 2050 is well beyond the likely lifespan of the CBPS. And ‘achieve net zero’ does not tell our staff which bonds to trade. So we need a nearer-term, intermediate, goal – in measurable units. The Discussion Paper considers a number of options (Chart 6). The first, a declining path for the carbon footprint of the portfolio, is simple to state and measure, and can be aligned with the Government’s target path to net zero. Implementing it at a more granular level is however complicated by the limited availability of appropriate sectoral pathways to net zero. Chart 6: Options for intermediate portfolio targets  11  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  11  A second, more forward-looking, approach would be to use an ‘implied temperature rise’ metric to target a declining temperature path. These convert data and projections of the current and future emissions of companies held in the portfolio into estimated future temperature levels, using assumptions about how those emissions compare to target paths.