samchain/econo-pairs-v1 huggingface dataset:
Perhaps this minority view was based on the practice, now becoming quite common in other central banks, that the proceedings of monetary policy committees are published, so that the public is made aware of how monetary policy decisions are taken by those entrusted with the authority to make them. There are the examples of the Federal Open Market Committee (FOMC) of the Federal Reserve Bank in the United States and the Monetary Policy Committee of the Bank of England. The minutes of their meetings are published with an appropriate time lag. In Hong Kong we do not have an equivalent of the FOMC or the Monetary Policy Committee. This is simply because we do not have an independent monetary policy and an independent body making that policy. We do not have a system whereby the HKMA has to take discretionary decisions to determine interest rates or to specify monetary targets. There has therefore not been a need for a mechanism for public scrutiny of discretionary decisions because there is nothing to scrutinize. 23. Our monetary system is rule-based. To the extent that there is a need to have a mechanism for public scrutiny, it should be aimed at ensuring that the HKMA adheres to the rules and does not indulge secretly in discretionary monetary management. We have already volunteered this mechanism in providing real time information on the monetary base. Changes and forecasts of changes to the monetary base are announced almost immediately after the relevant transactions have been conducted.

BIS central bankers’ speeches  1  Economic recovery is particularly well advanced in the US where labour market developments in the first few months of the year were generally positive. The US is on the cusp of full employment for the first time since the onset of the financial crisis in 2008. Economic growth in the euro area is gradually becoming more broad-based, and this is increasingly spilling over into the labour market. The unemployment rate has again fallen slightly in recent months. In China, growth remains robust, thanks to various economic policy measures aimed at stimulating domestic demand. Overall, international growth is principally being driven by domestic demand and the services sector. By contrast, global manufacturing and trade remain subdued. The international financial markets were dominated by turbulence at the start of the year, however positive economic signals since then have helped to ease the situation. Risk premiums and volatility have fallen perceptibly in recent months. At the same time, commodity prices have also recovered from their multi-year lows. We expect the global economic recovery to sustain over the next few quarters. Nevertheless, significant risks remain. Global growth continues to be fragile due to deeply entrenched structural problems. Furthermore, uncertainty emanating from political events could escalate, hampering economic development. The imminent UK referendum on whether to stay in the European Union has already caused volatility on the financial markets to rise. Swiss economic outlook I shall now turn to the economic outlook for Switzerland.
As I will explain later, the Treasury Market Practices Group has updated its best practices to emphasize the importance of supporting market liquidity as well as avoiding automated trading strategies that create a false impression of market price, depth, or liquidity. In conjunction with those best practices, the TMPG also released a white paper on automated trading that reviews several categories of associated risk, including operational risk, potential systemic counterparty risk, market manipulation risk, and transmission risk. October 15 Let me now turn to the unusual events of October 15. On that day, Treasury yields exhibited extreme volatility, with the benchmark ten-year yield trading in a range of about 35 basis points between the market open and close. This included a sharp decline in yields following the U.S. retail sales report at 8:30 ET that morning, and a highly unusual round-trip in yields just after 9:33 a.m. At that time, the ten-year yield fell about 15 basis points in a five-minute period, before nearly fully retracing that move in roughly the same increment of time. That very short “event window” was a remarkable occurrence in one of the world’s most liquid markets, and likely reflected a unique dynamic on what was already an unusual day. Indeed, the net change on the session as a whole was less than 10 basis points – a small fraction of the extraordinary intraday range that we are still discussing today (see the chart).

Besides exchange rate movements, these include the development of world market prices and the level of resource utilisation in Sweden. The importance of domestic resource utilisation has to do, for example, with the fact that most imported goods are handled and processed in Sweden before reaching consumers and that raising prices is generally more difficult when demand is weak. When we look back at the 1990s in order to draw conclusions about the future, all these factors have to be born in mind. Let me cite a couple of examples. During 1994 and much of 1995 a comparatively weak exchange rate led to rising import prices but the pass-through to consumer prices was smaller than the Riksbank had anticipated. One explanation was that capacity utilisation turned out to be below the Riksbank’s assessment both because it was overestimated initially and because demand was weaker, partly as a result of the Riksbank’s interest rate hikes. Another explanation was the krona’s marked appreciation towards the end of 1995. In 1998 the krona weakened again in connection with the Russian crisis. On a 12-month basis the depreciation amounted at most to about 10 per cent. Even so, import prices did not rise; on the contrary, they actually fell a good way into 1999. This largely reflected the factor that triggered the crisis: one of the largest price falls in modern times in commodity markets, including a barrel price of oil down towards USD 10. The result was markedly decreased international export prices - the equivalent of our import prices.
This may involve a risk that capacity utilisation will remain high and that inflation will eventually overshoot the target. Household debt has increased at a faster pace than income over the past ten years. Norges Bank’s calculations indicate that debt growth may largely be due to the sharp rise in house prices in recent years. Higher house prices have a fairly prolonged effect on household debt growth. Even though the rise in house prices is expected to slow, credit growth will therefore remain high for a fairly long period. Given the assumptions underlying our projections, it is likely that debt will continue to grow at a faster pace than disposable income through the entire projection period. The household debt burden has increased over the past year and is now record high. The interest rate burden is, however, relatively low. A normalisation of interest rates will increase households’ net interest expenses, but according to the projections the interest burden will not be higher than it was at the end of the 1990s. Households will be vulnerable if unexpected disturbances result in higher-thanexpected interest rates. Challenges ahead Petroleum activities give us an economic base that is not available to many other countries. But it also presents us with many challenges. 5/7  First, our petroleum resources are part of our national wealth. When oil is extracted and sold, petroleum wealth is transformed into financial assets. This wealth belongs not only to our generation, but also to future generations.

We have expected that the import pattern would gradually become more stable, but if the shift continues, the price-dampening effects of increased imports from low-cost countries in Asia and Central and Eastern Europe may persist longer than assumed. The change in China’s exchange rate regime in July, with a 2 per cent revaluation of the Chinese currency, may over time have an impact on price developments for imported consumer goods. The global economy Economic growth among trading partners appears to be somewhat lower this year than in 2004. In the years ahead, growth is expected to be relatively stable. The outlook for growth in different regions indicates that the imbalances in the global economy, with a large deficit in the US and large surpluses in a number of other countries, will persist. There are particularly large imbalances both in the US balance of trade and current account. Persistent trade deficits have pushed up US foreign debt to a high level. This is partly due to the federal budget deficit. Moreover, US households have a high level of consumption and a low level of saving. This may be related to a more rapid rise in the US population than in other OECD countries. This suggests in isolation that saving in the US is somewhat lower and investment somewhat higher, but the impact is now considerably greater than implied by demographic factors alone. The imbalances may persist, and may increase. International capital markets are deep and liquid with an ample supply of credit for US borrowers.
Both internal and external monitoring and oversight play an important role in ensuring behavioral norms are maintained, sound processes and procedures are being followed, and there is open communications across reporting lines. Limited contact with managers and leaders within the organization has the potential to leave employees lacking clear guidance, feeling isolated, and willing to take on more risk. In large complex organizations, this is also likely to vary across business lines, heightening the need for clear and consistent leadership and guidance from multiple levels within the organization. In response to these dynamics, we have seen financial firms take a number of steps over the past few months focused on mitigating behavioral risk associated with the pandemic and working remotely. For example, some firms have leveraged prominent instances of misconduct and customer abuses of coronavirus relief programs to reiterate clear expectations and standards around integrity and personal accountability for employee actions. Others have intentionally placed cultural leaders over businesses in need of a stronger control environment. This indicates that the pandemic may be leading to opportunities to grow cultural capital, or at least ensure practices are in place to ensure it is not eroded. Finally, perhaps the experience of shared uncertainty could have a positive impact on culture, particularly with respect to fostering greater empathy. I’ve certainly seen examples within my own organization of people stepping up when colleagues that are under greater personal pressure need more time to manage their external commitments.

As we look across the industry, hear the experiences of firms and read the emerging literature, like the recent report by the UK FCA, one can identify factors that are likely to impact, and possibly erode, cultural capital.6 I’ll outline several areas where these dynamics may be at play, including loss of personal interactions, severed networks, uncertainty, and decreased monitoring and oversight. Lack of personal interaction. The first dynamic is lack of personal interaction, which is critical to forming trusting relationships. As trust, a cornerstone of a good culture, is built through frequent interactions and reliable behavior, the lack of personal interaction at the workplace has the potential to weaken trust between colleagues, within teams, and across organizations.7 Trust is a complex human emotion that allows individuals to have faith in colleagues to do the right thing and not cause harm.8 Is it possible to sustain this ‘trust’ in colleagues as frequency of interactions decrease and the format of interactions make personal bonding more challenging?
On the other hand, the benefit appears small, quite simply because the effect on indebtedness appears small. 13  8  See Svensson (2013a). BIS central bankers’ speeches  Risks linked to household indebtedness should instead be managed by means of measures taken in other areas. The mortgage cap probably already has some impact. Finansinspektionen has also introduced a risk weight floor for mortgages and notified that it intends to raise this, which in practice will increase the banks’ costs for mortgages. The Swedish Bankers’ Association’s recommendation to draw up amortisation plans in line with Finansinspektionen’s notified requirement may also have an effect.14 Nor is there any shortage of ideas for further measures, including the introduction of countercyclical capital buffers, which they now use in Norway. Underneath all this is a problem of a more structural nature, namely a supply of housing that has grown slowly and a housing market that is not functioning efficiently. This has most likely contributed to pushing up the price of housing and consequently indebtedness. Neither monetary policy nor measures in the field of macroprudential policy can resolve this type of structural problem; they must be managed with entirely different measures. Do marginal differences in the repo rate play a role? In the same way as one can question whether a repo rate that is a few tenths of a percentage point higher or lower plays any role with regard to risks linked to household indebtedness, one can also question whether it has any significance for inflation and unemployment.

Long enough for the international authorities to think they would get time to fix problems in the regulatory capital regime before they gave rise to serious problems (such as the zeroweighting of 364-day lines of credit, which underlay the profusion of bank-like conduits etc). Long enough for many to proceed on the basis that “it couldn’t happen” or, indeed even after it began, “wasn’t happening”. Long enough, crucially, for investors to get too used to elevated returns. Those returns came largely from two sources. The fall in risk-free rates, brought about by an ex ante imbalance of global savings and investment; and the fall in risk premia, which may in part have flowed from improved monetary policy regimes around the world. The ensuing Search for Yield can be thought of as asset managers and bankers wanting to sustain into the future the fabulous ex post returns “achieved” as asset prices rose. Its main engines were leverage, and maturity transformation. A cocktail that not only raised private risks for asset managers and lenders, but also systemic risks. The upshot has been a protracted, and not yet concluded, period of deleveraging. That, in the great scheme of things, relatively small US subprime mortgage delinquencies could set this off shows just how fragile the system had become. Structural changes in the financial system really matter As commentators struggle to make sense of this, a lot has been said about the “originate and distribute” model of financial intermediation. Three comments on that.
However, expectations according to forward rates were much lower than the Riksbank’s repo rate path in the longer run. The total deviation between the repo rate path and forward rates can also be seen on the far right in Figure 3. Figure 5 The repo rate path and market expectations in April 2010 Per cent  Note. Market expectations are based on forward rates. “Before” are the closing rates on the day before the repo rate path was published. “After” are the closing rates on the day it was published. Prospera’s survey covers money market participants. Sources: Reuters EcoWin, TNS SIFO Prospera and the Riksbank. The real repo rate path How expansionary is the monetary policy that follows on from the Riksbank’s repo rate path? One way to gain an idea of this is to look at the development of the real interest rate. The real interest rate is the most important for the development of the real economy, as it is the interest rate on which consumption and investment decisions are based. It is defined as the nominal interest rate minus expected inflation. The Riksbank also publishes forecasts for the real repo rate in its Monetary Policy Reports. 8  BIS Review 85/2010  Figure 6 shows the Riksbank’s forecast from the April Monetary Policy Update together with different measures of market participants’ expected real repo rate. 8 Let us begin by looking at the Riksbank’s forecast for the real repo rate.

First, because financial markets are so highly integrated, central banks need to cooperate closely in order to master the problems. Second, incentive schemes in banks that have given particular priority to rewards for risky behaviour should be changed, and the instruments for measuring risks need to be reassessed. The way in which the Swiss National Bank steers the Swiss franc money market, however, has proved its worth, with the three-month Libor being successfully held inside the target range. In this way, the real economy has been protected from the upheaval on the interbank market. BIS Review 31/2008  1
Despite the considerable pressure of day-to-day events, I think stepping back in this way occasionally and looking both ways is a good idea, in order to maintain a sense of perspective and learn from the efforts of our forebears. The supervisory approach for banks, building societies and insurers in the UK has meandered down different paths, at different times – and each at a different pace. Indeed, even when regulation has been laid down in statute, each supervisory agency has taken time to develop and embed its own approach. For example, supervisors of building societies and insurers both received statutory responsibility around the same time – but my sense is that the building society supervisors were notable for their vigour and enthusiasm in implementing a more intrusive supervisory regime. All have in common that enhanced powers for supervisors often came in response to a crisis – and even when new systems of regulation have been developed internationally, these have often been based on the experience of domestic institutions going under and reinforced by the emergence of new failures. The most recent example of this is undoubtedly the huge swathe of reforms instigated following the 2008 global financial crisis. 23  All speeches are available online at www.bankofengland.co.uk/speeches  23  The average supervisory toolkit in each system of supervision is strikingly similar. It is clear that, regardless of whether you are a bank, building society or insurer, the three basic questions most regularly asked by a supervisor are: Is the firm financially sound?

Supervision, by contrast, is the dynamic pursuit of the relevant authority’s statutory objectives, through oversight of firms’ activities. To do this effectively, you of course need regulation – but one without the other in financial services would, in my view, be futile. At the PRA, we have committed ourselves to a judgement-based, forward-looking supervisory approach. This means that we proactively take action to meet our objectives and we evolve our methods to reflect emerging developments. It also means that we rely heavily on the judgement of supervisors and get them to unearth and scrutinise the top risks at any given firm. This is delivered by a keen supervisory focus on business models and the prudential health of firms rather than a sole preoccupation with firms’ compliance with regulation, important though that is. And because we rely heavily on judgements, the PRA has a central spine of decision-making committees, with the most important supervisory decisions reserved for the Prudential Regulation Committee (PRC). But where did this approach come from? Most comparisons between the PRA’s current supervision model and those that preceded it focus heavily on the differences between the PRA’s approach and that taken by the FSA before the global financial crisis. But the truth is that the practice of supervision in the U.K. has evolved slowly over time; indeed, the roots of supervision lie much deeper and can be traced back over the past 100 years or so.
Capital is not dead money, as is sometimes implied. It is available for disposal in order to finance the assets side of the balance sheet, including lending. Furthermore, there is no universal principle that says banks with more capital have less lending capacity; in fact, research has confirmed that banks with stronger capital had an easier time obtaining funding during and after the financial crisis, and they reduced their lending to customers less than other did — aside from merely surviving. Lúdvík Elíasson and Önundur Páll Ragnarsson (2018) “Short-term renting of residential apartments, Effects of Airbnb in the Icelandic housing market”, Central Bank of Iceland Working Paper no. 76. See: www.sedlabanki.is 2  5  Most companies need equity, as banks and other lenders are usually reluctant to grant loans to companies without it. But where banks are concerned, other factors are involved. Banks receive sight deposits, which are a part of payment intermediation in any country, but at the same time they are long-term investors on the assets side, with the associated risk of a run that could render them unable to honour their obligations. Such runs on banks are often connected to uncertainty about the banks’ capital. This is where central banks come in as liquidity providers and lenders of last resort, in addition to deposit insurance and other contingency measures that are part of the official safety net for the banking system. But the safety net creates a moral hazard that entails taking excessive risk at taxpayers’ expense.

One of the main reasons for reduced demand pressures in the economy is that GDP growth has subsided after peaking in 2016 and is now approaching its longterm trend rate. The slowdown in GDP growth reflects weaker export growth, as the tourism boom cannot be expected to continue at the pace seen in the recent past. Furthermore, the improvement in terms of trade has slowed down considerably. This means that the effects of the positive shocks that enabled us to grow rapidly and simultaneously keep inflation low are tapering off. The appreciation of the króna played a major role in the economy’s adjustment to these shocks. However, the Bank intervened in the foreign exchange market and imposed a special reserve requirement (SRR) on capital inflows to prevent the  Thórarinn G. Pétursson (2018), „Disinflation and improved anchoring of long-term inflation expectations: The Icelandic experience“, Central Bank of Iceland Working Paper no. 77. This improved performance of monetary policy is also discussed in detail in Central Bank Special Publication no. 11, entitled “Monetary policy based on inflation targeting: experience since 2001 and post-crisis changes”. See: www.sedlabanki.is 1  1  króna from overshooting. Now, however, a significant additional rise in the real exchange rate would be risky. Interest rates in Iceland are currently low in historical context, particularly in view of the business cycle position. With one short-lived exception, indexed Treasury bond rates have never been lower, and indexed mortgage lending rates are also at a historical low.