samchain/econo-pairs-v1 huggingface dataset:
In view of this situation, central banks have responded by further easing monetary conditions. In the case of the European Central Bank (ECB), at our September meeting we resolved to launch a package of measures which included cutting the deposit facility interest rate by 10 basis points (bp) to -0.50%, strengthening forward guidance on interest rates and improving the financing conditions of quarterly targeted longer-term refinancing operations (TLTRO-III). We also decided to resume net purchases under the asset purchase programme at a monthly pace of € billion as from 1 November and without a defined time limit. Our analysis indicates that this package of monetary policy measures provides a substantial monetary stimulus which will help to further ease the conditions of lending to households  2/29  and firms and thus assist the economic recovery of the euro area and, consequently, the sustained convergence of inflation towards our medium-term target. In any event, from the financial stability standpoint, the downward revision of the growth and inflation outlook and the resultant higher expectation that interest rates will remain very low, or will even be negative for a further period pose challenges of at least two types for credit institutions. First, this macroeconomic context will represent a challenge for deposit institutions to recoup levels of profitability more in line with the cost of capital. Indeed, in the last few months market expectations for growth of bank profits have declined.

In the domestic foreign exchange market, average annual depreciation of ALL against the EUR and the USD was 7.6 and 13.2 percent, respectively. 1.5  Inflation and monetary policy  1.5.1  CPI inflation  Consumer prices rose 2.2 percent on average in 2009, which is in line with the Bank of Albania’s target for inflation. As a result of the reduced inflationary pressures worldwide, annual inflation marked low rates – 1.8 percent on average – during the first quarter of 2009. In the following two quarters, inflation rates stabilized close to the lower limit of the Bank of Albania’s target, 2.0 percent. Annual inflation displayed an upward tendency in the last quarter, when it marked 2.9 per cent in average terms and converging to the inflation target. The highest inflation rate of 3.5 percent was marked in December. The increase of inflation in the last part of the year was mainly triggered by the more complete exchange rate devaluation pass-through to consumer prices, in the presence of upward primary commodity prices in the global markets. The slowdown of economic activity at home and the low inflationary pressures from the global economy created an environment of relatively low inflationary pressures. Core and non-traded inflation marked average rates of 1.3 and 1.6 percent, respectively, in 2009 attesting to the low inflationary pressures of the domestic economy. These factors offset the devaluation effect of the national currency, which led to higher prices of imported goods and a part of products that are still indexed to the exchange rate.
Medium-term inflation expectations per se have remained firmly anchored around levels consistent with price stability. This is in line with our reading of survey-based inflation expectations. The second message is that markets are, however, deeply sceptical that inflation can surprise much on the upside in the future. This is corroborated by survey-based measures, which show that, since the financial crisis, survey participants have been more concerned about deviations in the direction of lower inflation and less concerned about deviations in the direction of higher inflation.7 Another way of looking at this is to consider the option-implied distribution of average inflation over the next five years. You can see this on my next slide in the case of the euro area. Although this distribution reflects expectations over a nearer horizon, it re-emphasises the point that investors assign only a small probability for inflation to surprise much to the upside. But it also demonstrates convincingly that markets have by and large priced out deflationary risks in the euro area. As you can see, when we announced the APP in January 2015 these risks were considered to be very different. I see two main factors that may help explain why investors and professional forecasters are currently casting doubt on positive inflation risks.

The first is related to how we form our beliefs, opinions and attitudes.8 Specifically, the peculiar economic cycle that followed the global financial crisis – where very low interest rates around the world succeeded in reducing economic slack and in inflating the value of some assets, but not the prices of goods and services – may have made investors doubt the recurrence of upside inflation risk. And this may have led to a downward migration of the future inflation risk distribution. 4/7  BIS central bankers' speeches  This means that large shocks can push the economy into a previously unknown state – in our case a low inflation state – where the absence of, or break with, past regularities, such as the relationship between slack and inflation, may imply a long transition phase to a new steady state.9 Worse, if the beliefs I just mentioned guide our actions, then low growth or low inflation can be the result of self-fulfilling pessimistic expectations and can lead to so-called “stagnation traps”.10 The second, related, factor is that the nature of the uncertainties we face today may have changed compared with the pre-crisis period.
This would entail prejudicing, or setting aside, the price-stability target. Without prejudicing the price-stability target, monetary policy cannot aim at a higher level of resource utilisation than the normal level. It is thus a misconception, and unfortunately a common one, that the stipulation to not prejudice the price-stability target means that monetary policy should only aim to stabilise inflation around the inflation target irrespective of what happens to resource utilisation, what is usually referred to as strict inflation targeting. The stipulation means instead that monetary policy should also stabilise resource utilisation, but around a normal level, not a higher level. As far as I can judge there is now general agreement about this interpretation of the provisions of the Sveriges Riksbank Act and its preparatory work. So, at every monetary policy meeting we, that is the members of the Executive Board, have to decide what repo-rate path will best stabilise inflation and resource utilisation. The Riksbank usually expresses this by saying that monetary policy should be well balanced. If there is a conflict between stabilising inflation on the one hand and stabilising resource utilisation on the other, then a well-balanced monetary policy entails a reasonable compromise between the two. Such a conflict is in fact regarded as the normal situation, but a conflict does not always exist. In my view, there is no such conflict at present.

However, at the latest monetary policy meeting in April 2010 I chose not to advocate a lower repo-rate path but instead an “extended” repo-rate path. In this extended path, the period in which the repo-rate is 0.25 per cent is extended to the end of the fourth quarter of 2010 instead of to the end of the second quarter as the majority decided. I thus supported the decision to leave the repo rate unchanged at 0.25 per cent, but entered a reservation in favour of the extended repo-rate path. My reason for this was that such a repo-rate path has the same effects as the lower repo-rate path; that is a higher level of resource utilisation and a level of CPIF inflation closer to the target. 1 An expansionary monetary policy can thus be achieved either with a lower repo-rate path in which the repo rate is reduced now or with an extended repo-rate path in which the repo rate is maintained at a low level for a longer period of time. Some of my colleagues have had certain doubts about a repo-rate level below 0.25 per cent. As you know, I do not share these doubts. In this context, the extended repo-rate path has the advantage that these doubts are no longer relevant. It also has the advantage that it reduces the monetary policy decision to the question of when the repo-rate should be increased.
The IMF proposes, for instance, in its annual review of the Swedish economy, a combination of macroprudential measures aimed at the demand for loans: amortisation requirement, limits to the loan amounts in relation to income and a stricter mortgage cap, lowered from 85 to 75 per cent of the value of the housing.11 Measures within other policy areas must also be considered to manage household indebtedness All in all, I think that the new framework for macroprudential policy is a very important step with regard to both discussing systemic risk and managing household indebtedness. My assessment is that there is a fairly large degree of consensus that household indebtedness is developing in an unsustainable manner. The important thing now is that we do not get stuck in the analysis of the problems, but that macroprudential policy measures are implemented before the problems materialise. However, I also believe that measures in other policy areas may be necessary. The basis for the high level of household indebtedness is that we have had substantial imbalances in the housing market for several years. For the third year in a row, the European Commission pointed out in its report on macroeconomic imbalances that measures need to be taken with regard to the Swedish housing market. The Commission proposed, in addition to further macroprudential policy measures, measures to improve the tax system and increase housing construction.12 One element in this is the tax deduction, which has favoured mortgage borrowing.

I believe that the tax deductions for interest paid should be reviewed, and that a broad political agreement would be desirable. Measures should also be taken to increase the construction of housing. In the long run, it would be desirable to have housing construction that develops apace with demand, to avoid creating further imbalances. Let me now conclude with a look ahead to the next monetary policy meeting. The situation ahead of the monetary policy decision on 3 September Some time has now passed since the monetary policy decision in July, and I intend to briefly discuss what has happened over the summer and how I see the situation ahead of our next monetary policy meeting on 3 September. If we begin abroad, we can conclude that developments in Russia and Ukraine have had some negative effects on confidence among households and companies, particularly in Europe. The GDP outcome for the euro area with regard to the second quarter was also a little weaker than we had been expecting in July, although it is difficult to know exactly how much of this relates to developments in Russia and Ukraine. The signs of a slowdown in  11  See ”Sweden – 2014 Article IV Consultation Concluding Statement of the Mission”, June 2014, IMF. 12  See “Macroeconomic imbalances Sweden 2014”, Occasional papers 186, March 2014, European Commission.
25.02.2020  Economic and financial policy geared to climate goals Club Español de la Energía Pablo Hernández de Cos Governor  Ladies and gentlemen, good morning. I should like to thank the organisers and, in particular, the President of the Club Español de la Energía, Miguel Antoñanzas, for the invitation to participate in this seminar on such an important subject as sustainable financing for climate goals. Climate change and the transition to a more sustainable economy are undoubtedly becoming one of society’s main concerns. One of the reasons for this is that the impact of this transition will affect virtually every social and economic agent. The financial sector is no exception to this. Nor obviously is the energy sector. In my address today I wish to focus on three specific questions related to this issue. First, I will propose some basic principles which, in my opinion, should inform the economic policy deployed to guide the process of structural change entailed by the transition to a more sustainable economy. Second, I will describe the challenges that climate change and this transition pose for supervision and financial regulation. Finally, I will discuss what central banks can do to encourage the transition to a more sustainable economy. In particular, I should like to dedicate a few words to the role that monetary policy can play in achieving this objective.

The traditional answer provided by economic theory to this type of market failure is none other than “Pigouvian taxes” which equalise marginal private and social costs and cause emissions to be reduced to their socially optimal level.4 However, as we all know there is a big gap between theory and practice and, moreover, the “devil is in the detail”. This is true not only of the most technical matters, but also of the political ones. Deciding, for example, how to use the revenues raised is of crucial importance to the success of the transition to a more sustainable economy. This is so both from an economic perspective, promoting technological innovation and the adoption of clean technologies, and also from a social perspective, compensating the losers in the transition process. I will be referring to this issue later on. In my opinion, fiscal policy should play a leading role in the management of climate change, to deter the most environmentally damaging activities and to stimulate the investment needed to develop cleaner technologies and, also, to alleviate the social costs of the transition. This is the thrust of various initiatives currently under discussion. For example, those that seek to reconsider or supplement the EU emissions trading system (EU ETS) so that the price of carbon approaches that consistent with the Paris agreements. And, likewise, those designed to reduce environmentally harmful subsidies (EHS). At the same time, we should not forget the truly global dimension of the climate change challenge.
For a while, modern macroeconomics tried to get around this more or less intractable situation by picking just one out of a wide set of stories, often treating it as if it were immutable in time and space. And when reality deviated from that story for an extended period, it opportunistically explained it away as bad luck in the form of a series of unpredictable adverse shocks. A persistent challenge for inflation-targeting central banks is the phenomenon of inflation itself. We recognise that the CPI or some similar inflation measure, which lies at the heart of this monetary policy framework, may not be an ideal representation of what is meant by inflation in traditional monetary theory. Personally, I still adhere to the monetarist definition that inflation means a steady and continuous rise in the price level, that is, a situation where different price categories and nominal variables generally show a similar trend. CPI inflation does not quite fit this definition, and it is not always desirable to regard its short-term fluctuations as genuine inflation or deflation. This is partly because CPI inflation tends to change quite frequently as a result of shocks of a non-macroeconomic and non-monetary nature. If the central bank were to try to slavishly keep CPI inflation at a certain target level at all times, it would have to change interest rates or other instruments frequently and significantly, and would probably not be successful in doing so.

Out of this was born price stability defined as low single-digit inflation, usually derived from the consumer price index (CPI inflation). 1/5  BIS - Central bankers' speeches  In an inspirational group of economists here at the Faculty, we paid limited attention to the fresh trends in American academia and central banks at the time, and mainly discussed various historical views of money and monetary policy. After all, we weren't experiencing any great moderation around us at that time. In particular, the second half of the 1990s was quite wild in the macroeconomic and financial sense in the Czech Republic and many other small open economies. The Great Moderation phenomenon manifested itself here later as a "temporary calm before the storm" between 2003 and 2007. Then the Global Financial Crisis (GFC) came and put a definitive end to the idea of a Great Moderation. The Global Financial Crisis was no great surprise to me and my colleagues at the CNB. This is evidenced by the fact that in 2004 we were one of the first central banks in the Western world to set up a team for analysing risks to financial stability. The pitfalls of mainstream macroeconomics Just after the GFC, a heated debate erupted about the merits of mainstream macroeconomics. By that we mean the NKM presented in DSGE models. I will thus refer to it as NK-DSGE throughout my lecture, although today this term covers a wider range of approaches than it did 10 or 15 years ago.
The Stavanger was built not far from here, at Tollerodden in Larvik, and is an excellent example of the many wooden boats designed by shipbuilder legend Colin Archer. It was recently decided to return the Stavanger to Tollerodden, where it will be one of the main attractions at a planned Colin Archer Centre. The sailing performance of Colin Archer’s lifeboats was superior to that of the boats constructed by his competitors at that time, and they are beautifully designed. If you would like to see what a real Colin Archer lifeboat looks like, I recommend a trip down to the jetty once the official part of the programme here at Noatun is over to see the RS 1 Colin Archer, which, thanks to the dedicated efforts of enthusiasts, is still in magnificent condition. Moored next to it is the RS 135 Kaptein E. Nygård, which is stationed here in Horten on a daily basis and which is also open to visitors. Personally, I am no stranger to the sea. I have spent my summer holidays in Hvaler every summer since the mid-1960s, and I have thoroughly enjoyed sailing through the archipelago, admittedly at low speed. I always have sea charts and a GPS chart plotter on board and I am quite sure this is why I have not needed any assistance from the Norwegian Society for Sea Rescue so far. However, I greatly respect the Society’s work and what it means for the many people who sail along our magnificent coast.

In the presence of temporary shocks from the supply side, these factors were translated into negative economic growth for the first quarter. According to our estimations, the following months have recorded improved aggregate demand and economic activity, yielding economic growth for 2012. This growth, however, remains relatively low and inadequate to ensure full production capacity utilisation. It has led to low inflationary pressures during 2012 and is reflected in improved external position of the Albanian economy. The banking and financial system remains sound. Banks that operate in Albania are characterised by satisfactory liquidity and capital levels, and fit for financial intermediation. Transaction and risk indicators are also improving, as perceived in the financial markets and, following fluctuation in the first half of the year, interest rates have trended down. Given the above-mentioned circumstances, the monetary policy of the Bank of Albania has been increasingly stimulating. During the past year, we have sequentially eased the monetary conditions; after five consecutive key interest rate cuts, the cost of money in the economy reached its record low. Moreover, through our monetary operations, we have supplied the banking system with the liquidity it needs for smooth operation. Finally, through the review of regulatory norms and application of a prudent supervision of the banking system, we have managed to establish a stable financial environment for the country’s long-term development. Boosted confidence of the public in the banking system was followed by rapid increase of bank deposits, thus reducing reliance on foreign short-term financing.
SPEECH  Banking Union and Capital Markets Union: high time to move on Keynote speech by Luis de Guindos, Vice-President of the ECB, at the Annual Joint Conference of the European Commission and the European Central Bank on European Financial Integration Brussels, 7 June 2023 It is a great pleasure to be participating in this year’s joint conference on financial integration. This event offers an excellent opportunity to reflect on key developments in the financial sector over the past year and to reassess priorities for advancing the integration, development and safety of the financial system. Recent developments and the euro area banking sector In recent months, bank failures in the United States and Switzerland have affected financial markets worldwide. This “real-life stress test” has provided valuable insights and lessons for the euro area banking sector and for our regulatory and supervisory framework. The European banking sector has proven resilient. And the enhanced regulatory and supervisory framework put in place following the great financial crisis has proven its worth. But it is still incomplete – the Basel III agreement still needs to be transposed into EU banking regulation in a full and timely manner. We cannot be complacent. During the recent bank failures, deposits were withdrawn much faster than during the great financial crisis. Silicon Valley Bank lost more than USD 40 billion – almost 30% of its deposits – in a single day.

The extraordinary speed of deposit withdrawals was driven by the widespread use of online banking and the rapid dissemination of news via social media and was compounded by the highly concentrated customer base. [1] In this ever-faster digital world, banks, supervisors, central banks and legislators need to review the tools for safeguarding liquidity conditions and financial stability. The turbulence seen in financial markets this spring is a timely reminder of the benefits of strong regulation and supervision. While adequate regulatory standards are the first line of defence against bank failures, they must be supported by a second line of defence in the form of steady, powerful and agile supervision. Harmonised and effective supervision and an enhanced resolution framework  ECB Banking Supervision has successfully developed and promoted harmonised supervisory practices. It started to closely monitor risks related to rising interest rates when the first signs of inflationary pressures emerged, long before the bank failures in the United States. The European Commission[2] and the European Court of Auditors[3] recently confirmed that the ECB has established itself as an effective and mature supervisory authority, and the ECB has already started to implement their recommendations. The EU has made considerable progress in crisis management by establishing a robust framework for dealing with banks in financial difficulties. While they are not a direct response to the recent turmoil, we strongly welcome the European Commission’s proposed changes to the crisis management and deposit insurance framework.