samchain/econo-pairs-v1 huggingface dataset:
The MPC remains committed to achieving its 2% inflation target but subject to that, and to continuing financial stability, Bank Rate will not be raised until we have seen unemployment fall to at least 7% so we can explore just how much spare capacity there is in the economy. Meanwhile the Funding for Lending Scheme continues to support the supply of credit in the UK and has become more focussed on encouraging lending to SMEs. The outlook – as always – remains very uncertain. But it is certainly a brighter picture than it was a year ago, and with policy set to be supportive, there are good reasons for expecting that improvement to continue. 12  BIS central bankers’ speeches

Some economists have called for adjusting the inflation target, although in opposite directions: a few have argued for a higher target to avoid testing the Zero Lower Bound often (ZLB); others have called for a lower target, assuming lowflation is the New Normal. In both  2  BIS central bankers’ speeches  cases, hasty changes may only affect the CBs’ credibility and the expectation channel of monetary policy. We have more flexibility on the target horizon. This is the medium term and should not be confused with the 3-year horizon of the forecasts published by the ECB for instance, which may fall short of the target level; what matters is being on a path that is consistent with this medium-term mandate. Forward guidance and the announcement that rates will be “lower for longer” should provide reassurance over the CB’s determination to do “whatever it takes” to fulfill its mandate within this mandate. True, uncertainty about the causes of lowflation and low rates leads to uncertainty over the neutral rate and the need for accommodation; but the more uncertain our environment, the more important and useful it is that we be clear and predictable in order to reduce this uncertainty. According to simulations carried out within the Eurosystem and the BDF, clarifying that the future stance will remain accommodative for many years enhances the efficacy of Quantitative Easing (QE). Third challenge: how effective can non-conventional monetary measures be? The ZLB has proved not to be the effective lower bound.
It is still early to determine with a great degree of certainty the strong and sudden propagation of foreign shocks on domestic  6  For a review of the Chilean experience, see Cowan and de Gregorio (2007). The only empirical study that found some effects of reducing the extent of the appreciation is Edwards and Rigobon (2009), however the magnitude of such effect is small, since the elimination of capital controls from its maximum would have appreciated the exchange rate between 2 and 2.5%. In any case, it is useful to remind that the most appreciated real exchange rate in the last 20 years in Chile occurred in 1997, year in which there were capital controls, massive reserve accumulation, an exchange rate band and high interest rates. 7  Another factor underlying inflation pressures and a deceleration of growth was the higher cost of energy. Not only had thermoelectric power plants to operate with more costly inputs, but also unfavorable hydrological conditions and the shortage of natural gas implied that these more efficient sources of generation had to be replaced by diesel. 8  For simulations on the monetary policy response to an oil shock see Desormeaux et al. (2009). They conclude that the response should be moderated when the shock is transitory and policy is credible. A much stronger response is suggested by Batini and Terenau (2009). 6  BIS Review 113/2009  inflation. Inflation propagated to most prices, so core inflation also increased sharply.

In addition, the current repo rate of 3.75 per cent is comparatively low, not least when one considers that inflation is around 3 per cent. The next question is how much importance should be accorded to each of the various factors and which side of the balance carries most weight. As regards the excessively high inflation at present, we have tried to analyse whether there are grounds for supposing that it stems from the Swedish economy having been more “overheated” during the recent upswing than we counted on earlier. The preliminary conclusion I believe can be drawn is that the explanation does not lie there. Most things suggest that inflation ought to fall back next spring as the transitory factors that pushed prices up drop out of the change figures. An alternative approach to whether the high inflation is temporary or more permanent involves looking at the development of by far the most important component of costs, namely wages. In that wage agreements have been completed, it is possible to arrive at a comparatively firm picture of how wages are developing, at least during this year and next. With reasonable assumptions about productivity, most things suggest that unit labour costs should be in line with the inflation target. This presupposes that the registered increase in inflation expectations, above all among labour market organisations, does not show up in wage increases; if that were to happen it would be very unfortunate and face monetary policy with new challenges.
A new overnight facility for credit institutions subject to reserve requirements was established at the Central Bank. Collateral for overnight loans will be provided by government guaranteed securities held by the credit institutions. The next step in these changes will take place on April 1 when new rules governing reserve requirements will take effect. The reserve base will be widened to include the foreign borrowing of credit institutions while the reserve requirement ratio will be lowered as the change is intended to be broadly neutral with respect to required deposits, thus making the change neutral from a monetary policy perspective. The reserve requirement ratio will be 4 percent on obligations under 1 year to maturity but 1.5 percent on obligations tied for longer than 1 year. Also, the reserve requirement will cover more institutions than before, and only institutions subject to reserve requirements will have access to facilities at the Central Bank. It will be possible to meet the reserve requirement more flexibly than has been the case. Indexation of required deposits will be abolished but the interest rate on them will initially be set on the basis of prevailing yields. BIS Review 42/1998  -5-  The last step in these changes will be taken on May 21 when the first calculations based on the new rules concerning reserve requirements will be done. At the same time, the so-called discount quota, which is a facility that the Central Bank has offered to deposit banks, will be abolished.

Put simply, a balance sheet produced under US GAAP is twice as small as its equivalent using international standards. And capital appears twice as high. This creates confusion. Le Figaro – Will the United States implement Basel III? Christian Noyer – We’ll be monitoring developments very closely. I have no doubts about the commitment of the US administration and the Fed. 2  BIS Review 152/2010
While as a general rule I am against this invasion of jargon, perhaps in this specific case the initials are preferable to the longer version, because IPSs, the focus of this conference, are not merely “institutional protection schemes”, or legal instruments suitable for securing the benefits of consolidation under capital regulations. They are and should be much more than that. IPSs have arisen as an innovative structure in the banking system and, like all new products, they are best evaluated by organising their assessment in steps, or successive degrees of scrutiny, so that at the end of the process their structure can be fully appreciated. The first step in the process of evaluation will be to judge whether they are timely. The second will focus on their design and construction. The third will be a “use test”. And the fourth and final level of assessment will look at how readily they lend themselves to progressive development so as to cover potential future needs. Allow me to cover these successive steps or facets one by one. Let us start with the first, their timeliness. IPSs are a response to an unquestionable substantive need: the downsizing of the Spanish banking sector, following the excesses of the growth period prior to 2007. These factors left many institutions facing the challenge of a future far removed from the comforts that had characterised the previous period, namely: strong economic growth, abundant liquidity on international markets, extensive business margins and healthy assets.

The cost of this political shift is more evident so far in new trade expanding opportunities forgone, more than in a broad and major increase in the level of protection or barriers against imports of foreign goods and services. 2  BIS Review 4/2005  This is a difficult political challenge. Success depends in part on how creative we are in equipping our citizens with the skills that offer higher returns in the future. It depends in part on what you might call our commitment to the quality of equality of opportunity in America, for people are likely to be more accepting of change if they are confident of the opportunity for mobility and advancement. And it depends in part on confidence people have in the transitional safety net that is available to bridge the transition to future employment. The last challenge I want to emphasize involves education. The education imperative has always been compelling. It is more so today for several reasons. First, we are seeing a significant erosion in the traditional premium accorded higher education in the United States and in some dimensions of the relative level of educational achievement in America. This cannot be good for the cause of improving the odds of sustaining this productivity surge. Second, U.S. citizens now face the prospect of bearing a much larger share of the risk of paying for health care and preparing for retirement.
Once again, banks would suffer stigma in these securities markets. 3  In short, the use of capital buffers continues to be an important aspect of the fight against the economic effects of the pandemic. However, their actual use is hindered by the various factors I have just mentioned. In this context, clear communication on the part of the macroprudential and microprudential authorities regarding both the capacity to make use of these buffers and the flexibility in their subsequent rebuilding is crucial. In any case, and at the same time as we monitor the impact of the pandemic, over the next few months we will have to continue to monitor the use of capital buffers and assess, where applicable, the adoption of further measures in relation to them. On the basis of the experience gained during this crisis and with a medium-term perspective, the balance between structural and cyclical capital buffers may also be analysed as a way of avoiding, in future, the difficulties observed in banks’ actual use of capital buffers. Dividend payment restrictions A second question, closely related to the previous one, relates to the treatment of dividends during the crisis. As you are all well aware, one of the recommendations of the European prudential supervisors, which have been extended to a large number of other countries, was that banks should not distribute dividends and should be very prudent when determining the variable remuneration of their employees. I think it is important to explain the reasons for this measure.

High unemployment and low labour force participation among women may make room for further growth in employment even if the population stops growing. The demographic situation in Norway is more favourable, but the labour force in Norway is also likely to grow at a slower pace. Labour immigration, which has made an important contribution to the labour market since the turn of the millennium, has fallen sharply in recent years. The unemployment rate is relatively low in Norway, but many have dropped out of the workforce. One in six aged between 25 and 54 was without paid work in 2016. If we are able to mobilise more people to join the workforce, labour supply growth may hold steady, but the most likely scenario is slower growth in the labour force. Chart: Productivity growth The other factor, productivity, has contributed less and less to economic growth, which is a tendency we have seen for several decades both in Norway and other advanced economies. The question then arises whether the underlying growth potential of mature economies has diminished. Chart: Growth in technology leading countries and in Norway If we broaden our perspective to span several centuries, it is the rapid rise in productivity in modern times that stands out. For a long time, there were only marginal changes in living standards from one generation to the next. In economic terms, the Middle Ages was something of an ice age. The industrial revolution that began in England in the late 18th century put an end to this inertia.
For today’s purposes shocks are new, unanticipated developments which are clearly distinguishable from more routine developments. As an MPC member I want to try and bring out how I’ve been thinking about each shock in terms of the impact on demand or supply in the economy and the time frame over which these impacts persist. Demand being what we actually observe in terms of output, income and expenditure. Supply being more about the capacity of the economy. In terms of inflation, if a shock pushes up demand relative to supply then inflationary pressures are likely to build. Similarly if an unanticipated development pushes up supply relative to demand then inflationary pressures will subside. Back in February I focused on Brexit, the coronavirus pandemic and energy prices as three major shocks which were working through the economy. Today I want to cover four developments since then: the Russian invasion of Ukraine, the fall in UK labour market participation, UK fiscal policy and financial market turbulence. All four of these shocks matter to differing degrees to the economic outlook and to our policy response. Four shocks My February speech was two days before Russia began its illegal invasion of Ukraine. Today is Day 225 of the ensuing war and over that period global energy prices (as well as food and other prices) have risen further and also been highly volatile, particularly in the case of wholesale gas prices.

The picture you get is of successive upwards revisions to inflation and successive downwards revisions to growth, with the energy price shock the principal driver of both (Chart 7). By the time of the August 2022 MPR, the MPC was forecasting a recession starting in the current quarter and lasting throughout 2023, with a peak to trough fall of GDP of 2.1%. But because the fiscal and financial markets shocks post-date the most recent forecast it wouldn’t make sense to extrapolate this trend of forecast revisions forward as a starting point for our November forecasts. Chart 7: MPC’s inflation forecasts and MPC’s annual GDP growth forecasts  Sources: ONS and Bank calculations. In the August MPR we had already noted that that the risks around our projections from both external and domestic factors were exceptionally large, given the very large rise in wholesale gas prices and the consequent impacts on real incomes for households and on inflation. The MPC’s initial assessment of the Energy Price Guarantee, first made at the time of the September MPC, is that it will significantly reduce the degree of uncertainty around the outlook for UK retail energy prices over the period of the Guarantee and therefore also for CPI inflation. As a result the Guarantee means that CPI inflation is expected to rise by less in the near term, peaking at a little under 11% in October, lowering and bringing forward the expected peak in inflation, relative to the MPC’s August forecast.
The bank’s capital is examined in relation to all of its assets, even offbalance sheet items. And to meet the requirements, the capital must not fall below a certain ratio. One does not take into account historical risk relationships and other aspects usually used in the banks’ risk calculations. The leverage ratio thus limits risk taking regardless of whether the banks’ models show that their risk is low. Alternatively, the banks are forced to allocate much larger capital reserves than they do now. Otherwise, the leverage ratio will hamper growth in their lending. In this way, gross solvency functions as an additional protective layer against the type of incorrect assumptions in the banks’ models and measurements that were revealed during the crisis. Because the leverage ratio is a relatively uncomplicated measure, it is also more difficult to manipulate or misunderstand. This reduces the probability of the banks’ boards of directors, financial supervisory authorities, shareholders and others being deceived or else  6  BIS Review 159/2010  misinterpreting information. In connection with this, I can mention that the Basel Committee recently agreed on a number of principles that aim to clarify the role and responsibilities of the board of directors and to reinforce the independence and competence of the risk management function. Security and costs – a balancing act A valid question here is how all this will affect the banks and the Swedish economy. Various representatives of the bank sector have complained about the new liquidity regulations, for instance.

No one knew how large the losses would be and whether the reserve capital would suffice. Funding ran short. Because what financiers in the market would want to give loans to a bank that appears unsteady? And who would want money in an account in this bank? I am sure you will remember the pictures of the queues outside Northern Rock’s branches in the United Kingdom. To restore confidence, the state and the taxpayers in many countries had to inject capital and go in as owners of the banks. This would not have been necessary if the banks had held more capital when the dark storm clouds gathered in summer 2007. The Basel Committee has taken note of this. The current capital requirements are being raised substantially. If I may go into technical details, the new regulations require that the  BIS Review 159/2010  3  banks should have a Tier 1 capital corresponding to at least 6 per cent of their assets, or more correctly their risk-adjusted assets. The risk adjustment means that for each asset one recalculates the value, depending on whether the value of the asset can be regarded as certain. One sign of this might be, for instance, that the value of the asset has varied a lot. The higher risk an asset is believed to entail, the more capital needs to be allocated. At present, the minimum requirement for Tier 1 capital is only 4 per cent of the total riskweighted assets.
Nor have they developed a class of professional entrepreneurmanagers, like those who drive MNCs in the West and Japan. Changing these institutional features of Asian economies will be an arduous task. But over time the countries can, and must, change discredited practices. State-owned or family-run enterprises can be transformed into firms run along meritocratic lines by professional managers. Greater public ownership can strengthen market discipline and the incentive to improve returns for all shareholders. Companies that are not profitable have to be closed or restructured. Asian leaders understand this. For example, the governor of the Bank of Thailand Mr Chatu Mongol Sonakul said, describing efforts to promote corporate governance in financial institutions and companies:4 “What we are doing is a very long process. We’re not talking of months or years. We are talking in, maybe, decades or generations. We’re not changing our way of working; we actually try to change our way of life.” Governments play a key role in fostering and managing this process of change. They have to make the political judgment on how fast to go, how to sell the changes to the people, and what compromises are necessary. Only they have the mandate to decide, and only they can take responsibility for the outcomes. South Korea under President Kim Dae Jung is a good example of how this can work, as well as of how difficult the process can be.

Wage growth last year was the highest since 2011, with a further rise expected this year. The outcome of this year's wage settlement so far suggests that annual wage growth will be slightly higher than we projected in March. Higher wage growth means higher business costs and could lead to higher prices for domestically produced goods. The krone depreciation will generate higher costs for imported goods ahead. Chart 6: Further rate rise likely in June The Committee assesses that a higher policy rate is needed to dampen inflation. Since the publication of our March projections, overall economic activity has been broadly as expected. Excluding energy prices, consumer price inflation has also moved as projected. Higher wage growth and the krone depreciation will contribute to keeping inflation elevated ahead. If the krone remains weaker than projected or pressures in the economy persist, a higher policy rate than envisaged earlier may be needed. The future policy rate path will depend on economic developments, but we will most likely raise the policy rate again in June, at which time we will also present updated forecasts for the Norwegian economy. 2/2  BIS - Central bankers' speeches
Let me say at the outset that my very clear objective in terms of Bank of England notes is to maintain the integrity of our banknotes, and an important part of that is meeting the public demand. I am not trying to promote or kill our notes. The trends in banknote circulation and use I am going to talk about trends in banknote circulation in the context of the roles of money, as a medium of exchange (payments) and a store of value. Chart 1 illustrates the pattern of the total value of Bank of England notes in circulation over the last forty years. The striking thing is the acceleration of growth over the last fifteen years. This may come as something of a surprise to the “cash is dead” lobby. This chart suggests that nothing could be further from the truth. The total value of our circulation was around £ in the mid 1990s, while today it is around £ As the chart also shows, this increase can for the most part be attributed to one denomination, the £ note. BIS Review 162/2009  1  But it is important to put this increase in notes in circulation into context. Chart 2 does this by plotting the value of notes in circulation as a share of the nominal GDP of the UK, again over the last forty years.

I would add one other thought on the demand for banknotes, which is more to do with human psychology. I suspect most people, however much they use cards, feel a degree of comfort from knowing that they also have cash in their wallet or purse, even if it is as a back-up. What does this analysis tell us about future demand for cash? As a central bank responsible for the issuance of banknotes, two principles are at the front of our thinking: first, that we issue central bank money, in the form of claims on the Bank of England; and second, that in doing so we must meet the public’s demand for our notes. By issuing central-bank money, we are providing both a means of payment and a store of value. But I think we should recognise that the paradox of banknotes that I have described indicates that there may well be a limit to the growth of the value of notes in circulation insofar as the use of banknotes as a means of payment is not increasing. This is, though, a broad assessment, and I would not wish to offer a judgment on the level at which the demand of the public to hold more banknotes will peak. An important reason for this uncertainty is that, as recent experience indicates, the demand for banknotes as a store of value is dependent on the state of the economy and the financial system.