samchain/econo-pairs-v1 huggingface dataset:
The main risk is that inflation expectations stay elevated for a long time. The longer the price growth rate remains high, even if fuelled by temporary factors, the more considerable this risk is. We could already observe this over the recent three months. As regards external conditions, proinflationary risks persist as well. In the first place, they are associated with prices for energy commodities and other commodities. The damper mechanisms protect the domestic market against fluctuations of global prices for commodities. However, an increase in foreign producers’ costs might also affect inflation in Russia. For instance, this happens when we import foreign equipment and vehicles made of more expensive metals. Disinflationary risks are mostly associated with the fact that producer costs might decrease as fast as they have risen. We have recently observed a multifold increase in prices for container shipments. This has pushed up cargo delivery costs worldwide. However, this growth has stopped by the moment. Possibly, even if prices do not decline to pre-pandemic levels, they might adjust downwards considerably closer to their initial level of this year, and later on this will translate into product prices. Another important disinflationary factor is still recovery prospects in outbound tourism. I should focus on the anti-pandemic restrictions that are currently introduced. Last spring, we believed that restrictions would cause a slump in demand, that is, provoke disinflationary risks. This is exactly what happened in the second quarter of 2020.

We have also increased the forecast range of the annual average key rate for the next year by 1.3 percentage points, as compared to July. Considering such policy, inflation will decline to 4.0–4.5% next year. I will now speak of the economic situation. Except oil production subject to the OPEC+ cuts, the economy generally bounced back to its long-term growth trends in the second quarter and even exceeded them in a number of industries. Growth slowed down in the third quarter, which is evidence that the recovery had completed. It should be noted that the third quarter GDP was affected by a decrease in harvest and the worsened epizootic situation. Excluding agriculture, we estimate that GDP growth quarter-on-quarter was positive. Consumer demand remains the main contributor to the growth. One-time payments to households also supported consumption. The surveyed companies expect a further expansion of demand. According to the data on GDP for the second quarter and recent statistics for the third quarter, gross fixed capital formation also grows fast this year, and even faster than we assumed in our July forecast. The oil industry is a large sector where there is still a substantial space for the recovery growth. The OPEC+ is gradually easing the oil production cuts. Furthermore, the environment in the global markets of energy commodities has improved considerably. We have raised the forecast oil price for 2021 and 2022, specifically to 70 and 65 US dollars per barrel, respectively. I will now briefly talk of the situation in the labour market.
Øystein Olsen: Economic perspectives Address by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), to the Supervisory Council of Norges Bank and invited guests, Oslo, 16 February 2012. *  *  *  Demanding time for Europe “The year started without much hope, and it had to be expected that the pressure on business and industry would intensify, but however dim the prospects might have appeared, the outcome was darker than anyone had imagined. I need not enumerate the successive collapses that spread from country to country.” This was the opening of the annual address delivered by Norges Bank Director Nicolai Rygg 80 years ago. Britain had abandoned the gold standard and one country after the other, including Norway, followed suit. Interest rates had increased. Financial markets were turbulent. Although the tremors were on a greater scale in the 1930s, Nicolai Rygg’s description could serve as an apt retrospective today as well. In the course of the past two years we have seen economic problems spread across debt-laden countries in Europe. Greece was the first country to experience a financial collapse. The Greek government had to resort to external financial assistance in spring 2010, followed by Ireland and Portugal. The turbulence spread further in autumn last year. Interest rates on public debt rose markedly for Spain and Italy and thereafter Belgium and France. Several euro area countries are now struggling with soaring public debt and weak competitiveness in addition to restructuring and public budget cuts.

Lastly, Patricia Mosser, now a Senior Research Scholar here at SIPA, used to work at the New York Fed, and a number of Banque de France staff have had the privilege of working with her over the years. So, Patricia, allow me to thank you warmly for organising this lecture on the ECB’s monetary policy and the resilience of the Eurozone. In Europe, the euro construction process is pretty well-known, while the ECB monetary policy is often debated. In the United States, it may be the reverse: the monetary policy is often better understood than the euro construction process. Thus I will deal successively with both issues before turning to the future and a call for action in Europe. 1. The euro has strong foundations. Political foundations As you know, the single currency was officially launched with the Maastricht Treaty in 1992 and introduced in 1999. But Maastricht and the euro are naturally part of a broader history: the history of Europe, and its singular achievement of making the transition from war to peace. As early as 1946, Josef Müller, who was a leading figure in the German resistance to the Nazis and the founder of the Bavarian CSU, acknowledged that “we need[ed] a European currency, because countries that share a currency will never be at war”. The euro has indeed provided us with a strong symbol of unity among European nations.
The Bank of England is responsible for operation of the SRR (with the exception of Temporary Public Ownership, where the Treasury is responsible). The Bank will consult the FSA and Treasury before selecting the SRR tool to be used, and we need to obtain the agreement of the Treasury to the implications of the chosen tool for the use of public funds. Also, the Bank can make recommendations to the FSA when it feels that the SRR should be triggered, though as I have said, the decision is for the FSA. Finally the Financial Services Compensation Scheme (FSCS) plays an important role in the resolution process. This would be very obvious if an actual payout of depositors was chosen and the FSCS would work very closely with the administrator. They also have a prior role in assessing whether payout is feasible in a reasonable time. But the FSCS can also be requested to contribute to the cost of other forms of resolution up to the net amount it would have failed to recover in insolvency if there was an actual payout. This approach can be used, for example, where there has been a transfer of deposits – and the FSCS can provide  BIS Review 157/2009  3  a suitable deposit to contribute to the immediate cost to the authorities. The FSCS does not however operate a pre-funded scheme in which money is available on call to provide such a substitute deposit.

The imbalance within the economy which these figures reflect - notably the continuing imbalance between the internationally-exposed companies and sectors, which are having a really rough time, and the domestically-orientated sectors which are doing much better - is certainly not ideal. The continuing imbalance is not without risks. On the one side, we may find it increasingly difficult to offset the negative impact of the global slowdown in the face of increasing domestic private sector debt; and if the slowdown in the UK spreads beyond manufacturing to the services sectors it may cause unemployment to rise which in turn could slow the growth of consumer spending. But, on the other side, we may find it difficult to moderate the growth of domestic demand when the international environment improves. There is no doubt that if we could simply redraw the map, we would opt for stronger external demand and weaker consumption growth. That would represent a more sustainable balance within our economy. Sadly that is a choice that we are not immediately free to make. Doing what we can to encourage domestic demand growth to compensate for the global economic weakness is certainly preferable to an unnecessary slowdown in the economy as a whole. And that is the path we must for the time being continue to pursue. 2  BIS Review 85/2001  So what then are the prospects?
As you discussed this morning, there are a range of new rules and regulations being considered to enhance the regulation of the U.S. operations of foreign banks. Beyond these new rules, though, we are continuing to press ahead to make substantive enhancements to how we carry out supervision of the largest global firms doing business in the U.S. These enhancements largely follow along the work that we are doing to enhance overall supervision of all the firms that we supervise, so they shouldn’t be a surprise to you. These enhancements, many of which reflect lessons we learned through the financial crisis, include deepening our engagement with senior managers, including business line owners and directors of firms; developing a better understanding of firm strategy, revenue and business drivers and vulnerabilities; enhancing our focus on resilience and ensuring that buffers are strong – including stronger capital, liquidity, collateral management and contingency planning, to name a few; and increasing our attention on risk culture and risk appetite within the firms we supervise. BIS central bankers’ speeches  1  What I offer today is two-fold. First, I will identify three things that you – as global firms with a U.S. presence – can do to help remove impediments to our understanding the operations we are supervising and to make it easier to get our jobs done. This should also make it easier for you to understand and follow the rules that are set out for global firms.

From 2006 to 2010, the share of prime purchase loans going to borrowers with sub-625 credit scores fell from 8.5 to 3.5 percent. At the same time, the share of prime purchase loans going to borrowers with scores above 750 rose from about 35 percent to about 41 percent. While I am certainly not advocating going back to the loose lending standards of, say, 2006, I think we should be aware of how changes in the distribution have implications for the housing recovery. In particular, I would suggest that current lending standards are another reason the housing sector’s role in the recovery is likely to be weaker than usual. In addition to the challenge of availability of credit to borrowers with low credit ratings, housing has another issue. Both the homeowner and rental vacancy rates are quite high, as shown in Figure 10 – although there has been recent improvement in these rates, and hopefully the trend is now downward. High vacancy rates, of course, place downward pressure on home prices and rental rates, and serve as another headwind to a housing recovery. So again, all in all and despite some improvement in factors fundamental to a housing recovery, I expect that housing will not provide as much support to this recovery as it has in previous ones. But now I’d like to turn to the second question, and perhaps leave you feeling a bit less discouraged when we’re through.
The Riksbank uses a broad approach in its analysis of resource utilisation and describes a number of indicators in its reports, such as measures based on surveys of companies and on “gaps”, for instance the GDP gap and the number of hours worked gap, where the trend or normal level is calculated according to some method.3 The Riksbank weighs together these  3  See, for instance, the article “The stabilisation of the real economy and measures of resource utilisation”, Material for Assessing Monetary Policy 2010, Sveriges Riksbank. BIS central bankers’ speeches  3  indicators and makes an overall assessment of the current level of resource utilisation. The assessment is qualitative and can be expressed as resource utilisation being “higher than normal”, “normal” or “lower than normal”. A qualitative assessment regarding how resource utilisation will develop during the forecast period is also provided. This can be expressed, for instance, as “resource utilisation will rise and be close to normal at the end of the forecast period”. Although we publish forecasts for different gaps in our reports, we do not make a quantitative forecast that reflects the overall assessment of how resource utilisation will develop. One alternative would be for the Riksbank to simply decide to use one particular measure of resource utilisation as a starting point when setting the interest rate. But we have chosen not to do this. For instance, the difficulties in estimating what is a “normal level” for resource utilisation indicate it may be risky to commit oneself to any specific method.

China is now a key part of both global and regional supply chains for the production of low-cost manufactured goods. China now produces 80% of the world’s photocopiers, 50% of the world’s textiles and 50% of the world’s computers. These developments will tap the labour of hundreds of millions of people who were previously effectively outside the global market place. They are also triggering urbanisation – and infrastructure investment – on a scale, and at a rate, which makes our own Industrial Revolution look sedate, even puny. The Chinese Government expects 300 million people to migrate from the countryside to urban areas over the next 20 years. China had no motorways in 1988, now it has 41,000 kms, second only to the US. It is adding the equivalent of the UK’s total power generating capacity every year. Beijing alone plans to build 15 new metro lines by 2020, to create a network larger than the London Underground. No surprise, then, that China consumed 50% of the world’s cement last year. Third, and more tentatively, there seems to have been an increase in the international mobility of labour. This is the area where the continuing, largely political, barriers to free movement are most apparent, and where, partly in consequence, it is hardest to assemble reliable information.
When it comes to the costs of the expansionary monetary policy, there is also a risk that losses will arise on the Riksbank’s balance sheet as a result of the bond purchases. In pure accounting terms, the bond portfolio will be booked at market value. This means that the value of the portfolio will vary as interest rates change. The cost of funding the holdings will therefore increase when short-term interest rates eventually rise. If the Riksbank were to suffer a loss, however, it would not entail any particular problem, but it would lead to the surplus we pay to the state every year declining. There will thus be less money for the Swedish Treasury. We have nevertheless chosen to take these measures to emphasise that we want to safeguard the role of the inflation target as nominal anchor for price-setting and wage formation. Moreover, we have said that if more is required to get inflation to rise towards the target, we will do more. And we are prepared to do so with force. 2012 and Christensen, J. H. E. and Krogstrup, S. “Swiss Unconventional Monetary Policy: Lessons for the Transmission of Quantitative Easing”, Federal Reserve Bank of San Francisco Working Paper 2014–18. BIS central bankers’ speeches  11  Concluding reflections In my speech today I have tried to describe current monetary policy from an historical perspective. I hope that you have gained a deeper understanding of current monetary policy.

The prevailing international view during the great moderation was that financial crises could best be managed by monetary policy when they arose – this view has been described as the “Jackson-Hole consensus”. Another description of this view is that crises are managed by “mopping up afterwards”. This did not mean that there were no differing opinions, but as you know the advocates of these different views were talking to deaf ears. 11 However, the most recent financial crisis illustrates with great clarity the size of the costs of “mopping up afterwards”. In this context, it should be pointed out that the Riksbank warned about developments in the Swedish housing market long before the financial crisis. 12 This was in turn connected to the fact that we in Sweden had not in every aspect learnt our lessons from the 1990s crisis. One can say that the new stabilisation policy framework had given us control over public debt and inflation, but that there was no natural limit for indebtedness in the private sector. This led to the substantial increase in housing prices and household indebtedness we have seen – with a few brief intermissions – since the middle of the 1990s. The experiences of the global financial crisis have also led to extensive international regulatory work and to many countries now establishing new organisational structure and tools within what is known as macroprudential policy.
So the concept of bail-in after all the equity holders and the subordinated debt holders have been wiped out, could involve the transformation of senior debt into equity or semi-equity in a going concern bank. In such a case, it is a very good and important concept. To my mind, bail-in should be part of the extra powers given to the supervisor. That is the only way we can reassure investors that it will be used only when it is absolutely needed to avoid a bankruptcy. That means that ultimately it is in the interests of senior bondholders to know that they won’t be penalised just because it’s beneficial for other stakeholders, but because it can’t be avoided. This is why it is essential that this power should be in the hands of the supervisor. But bail-in needs to apply to the whole of the senior debt. I’m not completely convinced that there is merit in having specific bail-inable instruments like CoCos. This is because either it makes the basis of the bail-in very restricted and may not be sufficient in many instances so that in the end you may need recourse to a second layer. Or, if it is a big amount, it can be extremely costly because of the specific risk, and therefore it may be better in that event to move directly to equity.

In any case, the fact that bail-in is now on the table and can be used by the supervisor will probably be one of the reasons why the banks will be tempted to increase their capital base regularly over time, to demonstrate to the buyers of senior debt that they are sufficiently protected. It will also be a strong incentive for banks to limit and control their risks and clearly communicate to the market how they do so. EUROWEEK: Has all this done enough to break the pernicious and highly damaging loop between sovereign and bank risk that was so central to the crisis? Or is that loop one that is simply impossible to break? Noyer: I think we have reduced that risk. The work is not totally finished. We need to continue in the direction we have taken. But to my mind there were three decisive moves that have addressed the problem of this feedback loop. One was the action that was taken on the consolidation of public finances, because if you have stronger government finances then of course the risk for banks is reduced. The second was moving decisively on the banks’ capital bases, because clearly if you have stronger banks then the risk for governments is lower. And finally, the decision to move to a banking union starts with supervision and then allows us to advance to the second and third steps which will have to be a resolution scheme and a resolution authority and finally a euro area deposit guarantee scheme.
One example is that it seems to be possible to reach the target with a sufficiently powerful expansionary policy. One reservation here, of course, is that we still cannot be certain that inflation will really remain around the target, even if this is what the Riksbank expects. Another reservation is that neither is it obvious what part the Phillips curve has played in the rise of inflation in Sweden so far. Increased resource utilisation has certainly gone hand in hand with rising inflation, but we have also seen that wage increases have so far been surprisingly modest given the economic situation. In that sense, it is too early to say whether Sweden's experiences suggest that the Phillips curve is continuing to work like usual. But our experiences nevertheless suggest that central banks’ inflation targets are fully possible to reach. And the recent, relatively rapid increases in service prices are, after all, a sign that some form of Phillips curve is active (see Figure 5). There has been quite a lively international debate on the Phillips curve recently – about its slope and even about its existence. 15 Personally, I take a fairly agnostic view of it. I see it as a mostly qualitative relationship between resource utilisation and inflation that does not say much more than that high resource utilisation sooner or later tends to lead to prices and wages rising more rapidly and that low resource utilisation leads to them rising more slowly.

As Kenneth Arrow, Nobel Laureate in Economics, said about his four-year experience as a weather officer in the US during World War II, “one thing I learned from meteorology is that being an actual science was no guarantee of exactness”. Economics may or may not be an actual science, but it certainly suffers when trying to predict the future. There are at least three explanations for this unpredictability that are common to economics and other scientific disciplines. First, assigning probabilities is particularly difficult for infrequent high-impact events such as financial crises, tsunamis, or climate change, for which there are few precedents. Because the samples of such events are so small, as we learn about these processes our assessment of their likelihood will change, possibly sharply. Second, even systems that are deterministic rather than stochastic can be very unpredictable. Small differences in starting conditions can imply very different outcomes. Weather systems display chaotic dynamics, so that small initial forecast errors may lead to large revisions to the forecast further out. Economists, in contrast, often rely on simple linear models, but with additive stochastic errors. In modelling any phenomenon there is a choice, and among the experts in the area often a live debate, about whether it is more useful to use deterministic but chaotic or stochastic models. 1 But the motivation in both cases is to bring out the importance of unpredictability. Another feature that hinders predictability is that a priori indistinguishable shocks can have very different effects in some systems.