samchain/econo-pairs-v1 huggingface dataset:
Indeed, the unfolding of our monetary policy measures will ensure that financial conditions will remain very favourable, shielding the economy against the external headwinds and laying out the conditions for the build-up of domestic price pressures. At the same time, we are attentive to the possible side effects of the present monetary policy measures. These need to be carefully and continuously monitored. The ECB strategy review In January, the Governing Council decided to launch a review of the ECB’s monetary policy strategy. After more than 16 years, it was time to conduct a thorough review taking stocks of the profound structural changes that have intervened since the 2003 strategy exercise, and reflecting on what these changes and new trends mean for our framework. This process is expected to last one year and it will be conducted by the Eurosystem and the ECB staff. We will also reach out to academics, Members of Parliament – including the European Parliament – representatives from the civil society and business, and seek the opinion of financial market participants on selected issues. The scope of the strategic review will be comprehensive. That means that we will look at the quantitative formulation of price stability, together with the approaches and instruments by which price stability is achieved. We will also reflect on how other considerations, such as financial stability, employment and environmental sustainability, can be relevant in pursuing the ECB’s mandate.

However, once the economy has significantly improved, both fiscal and monetary policy will need to be much less accommodative. Getting this balance right will be one of the main policy challenges over the next several years. I am confident that the Fed’s Federal Open Market Committee (FOMC) will meet the challenge. Finally, I’d like to note that even with some early signs of economic improvement, a number of risks remain. As I have highlighted today, the housing market remains fragile and is not likely to contribute to economic recovery in its traditional way – and this is part of why I do not expect growth to exceed 4 percent in 2011. Furthermore, in many areas of the country the impaired balance sheets of borrowers, high foreclosures, and high vacancy rates imply a long time before local housing markets normalize. State and local governments remain significantly challenged by the aftershocks of the financial crisis and recession. And many state and local governments continue to have both short-run and long-run fiscal challenges. Finally, the large fiscal deficits of many governments accrued during the recession will need to be addressed. And as Figure 17 shows, financial markets are concerned that many countries will be forced to make very painful fiscal choices – in economies with already significant challenges – or risk default. Yet while risks like these remain, the economy is in a much better place than it was one or two years ago.
They limit borrowing, over the economic cycle, to the level of public investment and place an upper limit on the debt to GDP ratio of 40%. In assessing the fiscal position it is important to look forward and not just backward at the realised deficits over the past cycle. Of course, it is also important to recognise the many uncertainties surrounding the future path of the public finances. Central bankers probably talk too much about fiscal policy. Certainly, there are politicians, especially in Europe, who believe central bankers confuse the deficits which dot the fiscal landscape with all manner of economic evils, rather as Don Quixote confused the windmills which dotted the landscape of La Mancha with the terrible giants sent by some evil force. So I do not want to overstate the case and tilt at windmills, especially in the light of the fact that this month sees the 400th anniversary of the publication of Cervantes’ great novel. But it will clearly be important that the prudent approach to fiscal policy that has served the UK so well in recent years is continued - over the next cycle and beyond. In that way our national saving rate can be maintained or even raised. The market response to inadequate saving is higher real interest rates. Since the UK is a part of an open international capital market, long-term real interest rates in this country reflect the balance between investment and saving, including the stance of fiscal policy, not just at home but throughout the world economy.

Surprisingly, in the light of the fall in G7 saving, UK long-term real interest rates as measured by the forward rates implied by the yields on index-linked gilts - are near their lowest levels for twenty years. US and euro-denominated rates are also low relative to past experience. There may be other factors that have offset the effect of fiscal policy on real interest rates, such as demographic developments and higher saving and more open capital markets outside the G7. But there remains a risk, as discussed in the Bank’s recent Financial Stability Review, of an unwinding of low long-term real interest rates as the stimulus from highly accommodative monetary policies across the G7 economies is gradually withdrawn. What do these arguments mean for monetary policy today? They imply, I believe, three main challenges for central banks. First, the factors that affect the level of real interest rates in capital markets around the world also determine whether a given official interest rate is an expansionary or restraining influence on demand. When driving a car we normally know whether our foot is on the accelerator or the brake. That is less obvious in the case of monetary policy - hence the debate among economists about the level of the so-called neutral interest rate. Uncertainty about the extent to which monetary policy is applying the accelerator or the brake justifies central bankers’ continued interest in the monetary and credit aggregates which contain information about the pace of nominal activity and hence future inflation.
This is a great strength for the industry and highly beneficial to both banks and consumers. However, we should also acknowledge that it can expose some customers to higher risks arising from investment in complex financial products. I have in mind especially consumers who may be less sophisticated but who may nonetheless have a high level of trust in banks. In that sense, it was not surprising that following the financial crisis, there was greater demand by consumers and consumer groups to better understand the risks of investment products offered by banks. This demand has been amplified by a number of other trends, namely: the greater complexity of financial products; the rapid pace of change in financial standards and regulations; the rising number of high net worth individuals in Asia-Pacific actively looking for investment opportunities; and the recognition that regulation alone is insufficient to protect consumers. Financial education has thus become an important complement to market conduct and prudential regulation. Raising the financial competencies of individuals has become a long-term policy priority for the financial industry. This is particularly crucial in Hong Kong where, as you know, we have a regulatory framework based on disclosure and complementary customer suitability assessments. In that context, it is especially important that consumers understand a product’s features and risks thoroughly when considering their investments. They have to decide whether or not an investment suits their objectives, and whether they have the ability to assume the associated risks.

Like all happy marriages, the bonding should foster growth and help the partners to realise their potential during good times; and provide an anchor to help them to face the challenges of the bad times with resilience and confidence. 7. Both partners have certainly done well during the good times in the past decade. (i)  HK’s developments  8. During this period, Hong Kong has continued to consolidate its role as a premier international financial centre and has become a more globalised economy: –  The total assets of the banking system have increased 2.7 times to $ trillion, with foreign currency assets accounting for about 60% of the pool. –  The market capitalization of the Hong Kong Stock Exchange has become more than 4 times bigger, advancing from number 8 to number 6 in the global ladder. –  The bond market has also increased by about 3 times, with foreign currency denominated bonds accounting for about 40% for most of the time. 9. Hong Kong has also become a hub for private wealth and asset management. Nearly 80 of the top 100 global money managers are in Hong Kong. The total assets under management hit a record high of $ trillion in 2013, with 72% of the funds sourced from  1  Mr David Puth, CEO of CLS Group Holdings, and CLS Bank International. BIS central bankers’ speeches  1  non-Hong Kong investors.
This also entails increased international cooperation. Many financial crises in the 1980s and up to today have occurred in countries where rules and supervision are relatively ineffective. As a result, the financial sector has become fragile. The capital strength of financial institutions has been inadequate. Deregulation has occurred before the country’s financial infrastructure is in place. This has fuelled the build-up of financial bubbles. Large fluctuations in capital movements have often intensified the problems. Elements of this were also present during the banking crisis in the Nordic countries. The financial safety net should help prevent financial instability and curb the effects if instability should arise. This may also prevent the development of imbalances. Deposit guarantees, crisis liquidity schemes and the assumption that large banks will be rescued by the government may weaken market discipline. The result may be increased risk-taking. International organisations have developed international codes and standards for the financial infrastructure and for the regulation and supervision of the financial sector, which are in line with good 10 practices. These codes and standards should contribute to improving policy and creating more robust financial systems. They should make it easier for investors and others to keep abreast of developments, which in turn will increase their ability to assess risks in a country. This will reduce the risk of herd behaviour and the build-up of substantial imbalances. The International Monetary Fund plays an important role in international surveillance and crisis management. They have substantially strengthened their oversight of the financial systems in member countries.

Our stability reports have been judged to be of high quality, transparent and frank. We intend to live up to that reputation once again. 6  BIS Review 52/2008
For these and other reasons, work at the IMF and the Bank suggests that changing the macro policy mix in systemic countries would at best reduce only about one third of their excess imbalances (Chart 4). 16  Why not just leave the rest to exchange rates? This might prove risky not just because exchange rates tend to move slowly then significantly, but also because IMF estimates of the required changes are greater than 17  have occurred in any year since the collapse of Bretton Woods. 12  See Rachel, L and Smith, T (2015), ‘Secular drivers of the global real interest rate’, Bank of England Working Paper No. 571. As Ben Broadbent has noted, as uncertainty rises, the option value of waiting also rises – with a simple model suggesting it can add around 10pp to the hurdle rate that firms need to meet. See ‘Uncertain times’, speech by Ben Broadbent at the Wall Street Journal, 5 October 2016, available at http://www.bankofengland.co.uk/publications/Documents/speeches/2016/speech929.pdf. 14 For example, consider the following comparison between the euro area and the UK. In the euro area, the private sector continues to generate surplus savings of 5% of GDP. Those must be recycled effectively to generate an expansion. The UK no longer faces that challenge. Its private sector is in balance. The euro-area unemployment rate of just over 9% is twice that in the UK. Gross general government debt in the euro area is roughly the same as in the UK and below the average of advanced economies.

UK 10-year real government bond yields have fallen 115 basis points; by contrast 10-year real government bond yields in the US are down by around 25 basis points only. 2  2  All speeches are available online at www.bankofengland.co.uk/speeches  2  the outlook and therefore on the potential timing of any Bank Rate increase. But all expect that any changes would be limited in scope and gradual in pace. From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment. In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations. During the negotiating period the economy will be importantly influenced by the expectations of households, firms and financial markets about the nature of both the transition and the longer term economic relationships with the EU and other countries. Markets have already anticipated some of the adjustment. Depending on whether and when any transition arrangement can be agreed, firms on either side of the channel may soon need to activate contingency plans. Before long, we will all begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption.
When making decisions about monetary policy in March, we were considering the possibility of continuing to reduce the key rate in the second quarter, if the economic situation develops in accordance with our forecasts. In March inflation went down to 4.3%, and according to assessments on 17 April inflation has already fallen year-on-year to 4.1%, which is very close to target. The rate of inflation going down more quickly gives us room to reduce the key rate as early as April. I would even suggest that at the next Board of Directors’ meeting, set to take place in a week, there may be discussion about lowering the rate from between 25 to 50 basis points. In general, when carrying out monetary policy, we will be sticking to a careful and considered approach, taking into account risks and uncertainties, including movement in the behaviour of oil prices, and we will be keeping monetary policy moderately tight in order to keep the rate of inflation at around 4%, and to foster the reduction in inflation expectations. The strategy of fiscal consolidation elected by the Ministry of Finance, along with the planned reduction in the budget deficit, will enable stabilisation of state finances. From the point of view of monetary policy, for us it is important that the elected strategy limits inflation risks arising from fiscal policy. Fiscal policy impacts on monetary policy and vice versa, therefore it is important for us to have a regimen of ongoing consultation on this issue.

Elvira Nabiullina: Overview of Russia's fiscal and monetary policy Speech by Ms Elvira Nabiullina, Governor of the Bank of Russia, at the panel meeting of the Russian Federation’s Ministry of Finance, Moscow, 20 April 2017. * * * Good afternoon, Mr. Medvedev, and good afternoon to my esteemed colleagues. For us here at the Bank of Russia, the Ministry of Finance is our closest and most important partner. It is not for nothing that we are brought together in a single understanding of fiscal and monetary authority. And of course our measures – monetary policy on the one hand, and fiscal policy on the other – are closely intertwined, and have an influence on one another. We share the responsibility of maintaining economic stability between us. The financial system was the first to take the hit of external shocks experienced two years ago. And since that time we have often needed to make tough, and sometimes unpopular, decisions. In our view, the Ministry of Finance, in making conservative fiscal policy decisions, and in consistently holding the course towards reducing the budget deficit and towards reducing dependence on oil revenues, has made a significant contribution to the preservation of stability and provided support to adaption processes in the economy. Major credit is due to the Ministry of Finance for the fact that the Russian economy now feels more secure and macroeconomic indicators are normal. The current economic situation in general looks very promising.
Essentially, it all comes down to a choice between two alternatives. On the one hand, central banks can try to slow down a worryingly rapid price rise in the housing market by keeping interest rates higher than they otherwise would have been. The obvious risk is that if increasing prices actually are driven by fundamentals, then an incorrect assessment has  2  BIS Review 134/2008  been made and demand in the economy will be subdued unnecessarily. But if the assessment was correct, a rapid downward correction in house prices may be avoided, or at least mitigated, as well as a subsequent fall in demand. On the other hand, central banks can disregard the fears and refrain from raising the interest rate. If price increases in this case are due to fundamentals a needless slow down in demand will be avoided. But if prices are due, for instance, to over-optimism among households and lenders, then severe problems may occur in the future when there is a rapid downward adjustment of house prices and a subsequent fall in demand and inflation. Which of the two alternatives is preferable can always be discussed, and may quite likely vary from case to case. However, it is far from obvious that the best choice is always to wait and see when facing a rapid increase in the price of houses or some other asset.

So, what is it that we need in order to achieve better crisis preparedness? As I just indicated, one important requirement is to have in place solid frameworks for the management and closure of distressed banks. Such frameworks include several different aspects, everything from deposit guarantee schemes to insolvency procedures. Basically, it is a quite technical mix of legal and financial measures which can look rather different from country to country. However, the basic concept applies to all. Frameworks should facilitate the quick and efficient closure of banks at a low cost to the deposit guarantee system, while making shareholders and uninsured creditors bear the responsibility for their investment decisions. It must also allow for special measures to be taken in the exceptional situation where the failure of a bank risks destabilising the financial system as a whole. Also in such situations, the government needs to have a strong negotiating position relative to the shareholders. Necessary ingredients for achieving all this are to allow distressed banks to be put under special receivership and to enable governments to issue guarantees and make capital injections. As a countermeasure the government obviously needs to have farreaching authority to take control of the institution, for example by requiring the compulsory sale of shares. 4  BIS Review 134/2008  With regard to central banks there is also reason to contemplate how crisis preparedness can be improved. For example, we need to consider how appropriate flexibility is achieved in the central banks’ operational frameworks to deal with extraordinary situations.
BIS Review 73/2004  1  coincidences are not evidence of guilt. Bookshops do not stock such titles as “I would have been a billionaire if only Lady Luck had been faithful”.3 In my lecture tonight I want to illustrate two propositions. First, in a wide range of collective decisions it is vital to think in terms of probabilities. We cannot avoid taking decisions, so we must accept the need to analyse the uncertainty that inevitably surrounds them. H.G. Wells is often reported as saying that, “Statistical thinking will one day be as necessary for efficient citizenship as the ability to read and write”. And that is even more true today when we are inundated with statistics from every quarter. Second, in order that public discussion can be framed in terms of risks, the public needs to receive accurate and objective information about the risks. Transparency and honesty about risks should be an essential part of both the decision-making process and the explanation of decisions. I want to illustrate those two propositions by considering as an example public policy about pensions an issue, you might think, of particular interest to many of us in the Academy. When the Pensions Commission reported in October, it highlighted the financing gap in our present system. But we must not lose sight of the equally important question of what are the risks incurred in pension provision and how should they be shared among us? It is not my intention to make any recommendations.

In his book Reckoning with Risk, Gigerenzer argued forcefully that risks should be presented not as probabilities but in terms of natural frequencies, which correspond to our experience in counting events. Although people do understand probabilities in familiar contexts, such as betting on horse races or tossing a coin, it is not easy to calculate odds when the context is unfamiliar. (b)  Explaining probabilities  How then can we best present information about risks to the public? Both the Monetary Policy Committee and the Met Office face this problem almost every day: the former in explaining the outlook for inflation and the latter in forecasting the weather. Both have independently developed similar visual representations of forecasts that avoid the use of the word “probability”. Chart 6 shows the forecast for inflation over the next three years published by the Bank of England in its latest Inflation Report on 10 November 2004. It is in the form of a ‘fan chart’. We do not say that in our view inflation will be 2%, or any other number. Such a statement is incoherent because a forecast is inherently probabilistic. So we represent the uncertainties by the coloured bands in Chart 6.14 Their interpretation is as follows. If we found ourselves in economic circumstances identical to today’s on 100 occasions, we would expect that inflation would lie within the darkest central band on only 10 of those occasions.