samchain/econo-pairs-v1 huggingface dataset:
Bank’s ability to absorb such projected losses would depend on their ability to generate revenue in the future as well as on their current capital cushions. The assessment identified a net capital need of $ billion based on the fourth quarter 2008 capital positions of the firms. After taking account of capital-raising actions already underway as well as the revenue generated in first quarter 2009, the net need for new capital was $ billion spread across 10 of the 19 institutions. These capital needs were for the highest quality type – common equity. Perhaps the most striking outcome of the process was that a detailed publication of the results for individual banks proved to be confidence enhancing and served to help make banks “investable” again. Thus, a key lesson from the SCAP process was that, under certain circumstances, transparency about the methods used and a willingness to commit to disclosure of the results by public authorities can be a calming force. Finally, it is worth noting that while the financial crisis has taught us that financial institutions need high-quality common equity capital to absorb losses, that transparency and disclosure about their potential exposures are essential, it has not given any definitive indication of how much larger the capital buffers of financial institutions need to be to assuage worries about future tail events that can drive panics.

The solution for the efficient operation of the time-out was “on the fly” to combine the power of the FDIC to provide guarantees to liability holders of banks under the systemic risk exemption embedded in FDIC Improvement Act with two other authorities. The first was the U.S. Treasury’s new ability to provide capital from the new TARP funds, and the second was the Federal Reserve’s authority in unusual and exigent circumstances to flood the financial system with as much liquidity as it needed. In the latter case the appropriate measure of the escalation is not the actual amount of liquidity that was drawn from the Federal Reserve but the commitment to supply whatever was needed. 8 This commitment was captured succinctly in the minutes of the October 2008 FOMC meeting: “...the Committee agreed that it would take whatever steps were necessary to support the recovery of the economy.” Of course parents usually have the capacity to perform on a time-out if the initial announcement directs the child in the appropriate direction. In this case, the initial  7  The time-out of an extended bank holiday used by U.S. President Franklin D. Roosevelt in 1933 was not available. 8  Around $ trillion was drawn but the total capacity of the existing and new facilities offered by the Federal Reserve was closer to $ trillion.
Although some of the excess reserves that have been generated by the balance-sheet expansion were initially sopped up by the Treasury’s Supplemental Financing Program, total excess reserves have climbed to more than $ billion from nearly zero at the beginning of the crisis. The sharp rise in excess reserves has caused the monetary base, which is simply the sum of currency plus total reserves, to expand significantly. The increases in excess reserves and in the monetary base generated by the Fed’s balance-sheet growth have led some observers to worry that this expansion will ultimately prove inflationary. Proponents of this view say that the monetary base, the broad monetary aggregates, total credit outstanding and inflation have historically tended to move together, at least over longer time periods. Thus, if the monetary base is growing rapidly, as it has been over the past year, the view is that this growth will ultimately lead to inflation. Is this concern well founded? The answer is that in a world where banks could not be paid interest on excess reserves, these persistent high reserve balances would indeed have the potential to prove inflationary. 2 In that world, the excess reserves are likely to lead ultimately to an overly accommodative monetary policy. The story goes like this: If banks are earning no interest on their excess reserve holdings, they will be willing to lend those reserves out to any creditworthy borrowers as long as the interest rate is positive after adjusting for risk.

The asset purchase programs have helped to keep longer-term private interest rates relatively low, and the expansion of liquidity facilities has helped to restore more normal market function. However, this does not mean that the Federal Reserve balance-sheet expansion and Treasury purchase program are cost free, only that the benefits of these programs, individually and collectively, are seen as exceeding the potential costs. Nevertheless, there are three issues on the cost side that deserve note. First, policymakers need to take seriously any concerns that the Fed’s actions might conceivably lead to an inflation problem. After all, inflation is driven mainly by two variables – inflation expectations and the degree of pressure on resources. It would be potentially very damaging if any of the Fed’s programs were to unhinge inflation expectations. One risk with embarking on the Treasury purchase program was that it had the potential to create the misperception that the Fed was providing the fiscal authorities with the means to fund a more stimulative fiscal policy than they would otherwise have been able to finance. This misperception around the intent and purpose of the program could have undermined the Fed’s credibility and triggered a damaging rise in inflation expectations. Indeed, one of my primary goals for this speech is to make it clear that we have not compromised our ability or our commitment to keep inflation in check. Keeping inflation and inflation expectations well anchored around a low level is essential.
Generally, Macedonian economy has been relatively successful in offsetting the crisis consequences which was mainly due to the solid initial conditions prior to the crisis without massive macroeconomic imbalances, the establishment of few new production capacities based on foreign capital that largely contributed to the export diversification, stable and sound financial system and adequate macroeconomic policy mix. The environment for monetary policy implementation in 2013 is quite favorable, considering relatively stable inflation developments and comfortable foreign reserves level. In the first half of 2013, the average inflation was 3.6%, mainly due to higher food and energy prices. Our latest forecast for the average inflation rate in 2013 is 2.8%, with expected further slowdown to 2.3% (close to our historical level) in 2014, until when no pressures of higher significance by the demand side are being expected. However, there are risks related to this forecast, reflecting the uncertainty about energy prices as well as the world and domestic food prices dynamics and their direct and indirect pass-through to inflation. The performances in the external sector in the first several months of 2013 and the latest estimates indicate quite favorable position in the balance of payments for this year. The reduced trade deficit is neutralizing the lower net inflows through private transfers. Therefore, the current account deficit in 2013 is expected to remain moderate at 4.2% of GDP, which is similar to the previous year.

But the IEO also raises some deeper questions about how much protection the PRA should seek to deliver, for which sorts of policyholders, and with what confidence. And it is those deeper questions that I intend to consider briefly in the remainder of my comments today. Insurers are subject to what is known as “twin peaks” regulation in the UK. In addition to supervision from us in the PRA, the Financial Conduct Authority also supervises insurers. And the IEO report makes it clear that, in the context of securing policyholder protection, the FCA has the primary role. The key word of the PRA’s objective is “contribute”. We should only act when there are prudential concerns, whereas the FCA acts on wider matters of fairness. To give an example: the PRA might intervene to prevent an insurer from selling new policies if it had inadequate financial resources, but it would be for the FCA to consider whether those policies contained unfair terms and conditions. In most circumstances the split of responsibilities is clear, but we need to be sure we are sufficiently explicit about the limits of the PRA’s role in respect of areas such as with-profits business, corporate restructurings and firms that close to new business and go into run-off. Another important consideration for us is whether the PRA should seek to protect all policyholders equally. The insurers we supervise received £ of gross written premium in 2016.
13 However, the fact that it is difficult to estimate stable links between resource utilisation and inflation using econometric methods does not mean that these links do not exist. International experience indicates that minor variations in resource utilisation in normal times do not significantly affect inflation, but that a very low level of resource utilisation noticeably dampens inflation. In the current crisis, with a very low level of resource utilisation in the United States and the eurozone, underlying inflation has fallen from normal levels of around 2 per cent to around 1 per cent. As far as Sweden is concerned, it appears that, despite everything, there is a relatively strong link between underlying inflation and resource utilisation measured using the RU indicator with a time lag of one to two years. (Figure 12. The RU indicator and HICP inflation excluding energy 14 ). In Sweden, underlying inflation measured in terms of the CPIF (the CPI with a fixed mortgage rate) has stayed at, and even above, 2 per cent over the last two years despite the fall in resource utilisation. This is probably related to the substantial weakening of the krona in the most acute phase of the crisis. This contributed to rising import prices measured in Swedish kronor, which kept up inflation. The krona has now strengthened again and is more or less back to its pre-crisis level against the euro, and CPIF inflation has fallen back to below 2 per cent. (Figure 13. CPI and CPIF inflation).

For my part, I have felt very convinced of two things, which I clearly explained in the most recent minutes. Firstly, we ought to increase the repo rate in the months ahead, as the Swedish economy is developing so strongly. Resource utilisation is increasing, which will increase inflationary pressures over time. We should therefore ease up in order to avoid excessive inflation in the period ahead. Secondly, the long-term repo rate should be approximately 4 per cent, corresponding to inflation of 2 per cent and a real interest rate of 2 per cent. The latter figure is what the short real interest rate on government bonds has been, on average, in both the United States and the eurozone for long periods of time. On the other hand, it is difficult to have a definite opinion of what the repo rate ought to be in two or three years. Neither our own nor the market’s forecasting abilities are sufficient to make solid forecasts over such a period. Among other reasons, the repo rate will be dependent upon developments in the eurozone and in the United States, and the impact these may have on the Swedish economy. Weaker international development could entail weaker development in Sweden and a lower repo rate path in the long term. However, stronger development of the Swedish labour market could entail higher inflationary pressures and a higher repo rate path. Despite this uncertainty, my view is that we should report the assumptions we make about the repo rate in conjunction with our forecasts.
There will quite probably be hard questions about the organisation of some banks; about which services needed to be maintained; about conflicts between the insolvency laws and special resolution regimes of different countries; about how losses can in the future credibly be made to fall on wholesale creditors; and, maybe, about the issues confronting burden sharing amongst national authorities if, notwithstanding these efforts, fiscal support nevertheless proves unavoidable when an internationally active bank fails in the future. Over time, this could lead to something of a revolution in the supervision of banks – because of the inducement to  4  BIS Review 134/2009  design regulatory arrangements to cater for circumstances in which supervision had failed to avert distress. Imagine that despite all the obstacles, we make terrific progress with recovery and resolution plans over the next few years. To be clear, it is not that we can promise that yet: the work of the regulators: internationally has just begun. Rather, the point is that even that would not be enough. The community having finally recognised that we cannot rely wholly on regulation and supervision, we must not now make the analogous mistake of thinking that we can rely on resolution plans. However good, those de-risking and wind-down plans will sometimes prove flawed. That is why for some months I have been arguing for the need to articulate a framework for Capital of Last Resort provision.

It just cannot be acceptable that the downside from excessive risk across the financial system as a whole falls to the general taxpayer, to households and firms throughout the economy, if the upside is enjoyed by a narrower group of shareholders and managers. This is not just an issue of economic efficiency – of the allocation of resources – and of leaning against the risk of even bigger crises down the road, but also of social justice. That is why the debate has attracted so much interest. But I hope I can persuade you that the Too Big To Fail problem matters to bankers too. Because the Lehman case demonstrates that in a democracy, political constraints are uncertain and so even Too Big To Fail firms can sometimes be allowed to fail. Banks need a system in which they are better protected against mismanagement by their peers. The debate calls for technocratic solutions to be laid out, but choice amongst those solutions should be understood and accepted by society at large. And the solution needs to be an international one. It is therefore good news that the G20 has commissioned work from the Financial Stability Board on the Too Big To Fail issue. So the stakes are high. By the lights of our successors, we are bound to get it wrong, but can we get to the right ballpark?
In line with developments elsewhere in the world, the Swedish purchasing managers index for October also showed a positive development. The expected upturn in private consumption is confirmed by new information, in this case turnover in the retail trade sector. The picture of a gradual, cautious strengthening of the labour market is also supported by incoming data regarding, for instance, new job vacancies, redundancies and companies’ recruitment plans. Employment appears if anything slightly stronger than was expected," said Mr Heikensten. “Inflation in the Swedish economy has been low since the end of 2003. According to the most recent data, for October, annual inflation in terms of the CPI and UND1X stood at 0.5 per cent and 0.8 per cent, respectively. The low domestic inflation rate is largely due to a surprisingly rapid increase in productivity. At the same time, imported inflation has been kept down by strong global competitive pressure, spare resources in the global economy and a previously relatively strong krona. Our assessment in the Inflation Report was that inflation would increase in future, but at a fairly moderate rate. At the beginning of the forecast period the oil price in particular was expected to push up the rate of price increase. After that, rising capacity utilisation in Sweden and abroad, together with diminishing effects of a number of price-dampening factors, was expected to lead to inflation rising.

Against that background, our assessment was that UND1X inflation would rise from the current low levels and be close to the target a couple of years ahead,” observed Mr Heikensten. ”Experiences show that the situation in the financial markets is often slightly uneasy during phases when interest rates are adjusting upwards. This has also been the case over the past year. There appears to have been unusually clear focus on differences in short-term rates between different  1/2  countries, which has had repercussions for the krona. Let me therefore underline that it is not at all strange that Swedish short-term rates have been lower than those in many other countries. For various different reasons, some of which I have mentioned earlier, inflation has been much lower in Sweden than in other countries. Compared with the United States and the euro area, the difference is between 0.5 and 1 percentage point on average for the past three years, depending on which inflation measure is used. In 2004, the difference was as much as 2 percentage points. When one looks ahead, which is important in this context, according to Consensus Forecast, forecasters are expecting higher inflation in the euro area and the United States than in Sweden,” continued Mr Heikensten. ”It is clear that the krona has developed more weakly since the spring than the Riksbank expected. As you know, we do not have a target for the exchange rate. However, it is an important factor when we assess future inflation.
To begin with, the Central bank is not indifferent to the movements of the exchange rate, in the same way as we are not indifferent to the evolution of unemployment, credit or any other variables relevant to the country’s economic performance. The Bank’s constitutional act mandates that we safeguard price stability and the normal functioning of internal and external payments, but fulfilling this mandate requires us to adopt those measures which will drive the economy to making full use of its resources and maintaining a sustainable balance of payments. Price stability and financial stability are cornerstones of our economy’s performance, growth potential and human well being. I could make a lengthy discourse about how the Central Bank reconciles its mandate with welfare objectives but I think it is enough to observe our track record over the past two years to recognize that if output and employment are recovering so strongly today, it is largely thanks to the flexibility of our monetary policy in facing the worst global economic downturn in almost a century. Our second principle is that we have to evaluate the effectiveness, costs and benefits, of our actions. We must also explain with maximum rigor and transparency our decisions and opinions regarding the main trends of our economy. Our reputation and credibility would suffer if we took any actions without being soundly convinced that they would be both convenient and effective towards achieving our objectives and at the same time inflict the smallest possible social cost.

Fourthly, our financial system is solvent and well regulated, which limits the possibility of appreciation bubbles being created by the prospect of inexpensive financing from abroad and abundant credit. We will continue to face important adjustments in the global economy, with exchange rate tensions in all the economies of the world because rigidity among the most important currencies persists. Recovery of the global economy will be gradual and will vary greatly from country to country. This situation presents a national task, which we must each take on board from our own perspective. In the Central Bank we are paying particular attention to the evolution of the exchange rate because we recognize that there has been rapid and substantial appreciation and we must be watchful that this does not hinder the vigorous growth of our economy. That growth will be long-lasting provided that we ensure stability. Thank you. 4  BIS Review 135/2010
In any event, for the more stable components of inflation (excluding energy), a gradual rise is forecast, in line with the expected increase in the degree of use of productive resources. The main risks and factors of vulnerability In this scenario, a series of risks should be highlighted. Globally, behind the recent increase in economic activity, an expansionary stance has underlain demand-side policies in most geographical areas, in particular in the case of the monetary policy still maintained by the main advanced economies. By their very nature, it is to be expected that these measures will be reversed in the future, which might affect agents’ expectations. While the various economic authorities are committed to a process of 4/9  monetary normalisation, in as gradual and orderly a way as possible, specific bouts of tightening on financial markets, as seen in the early months of this year, should not be ruled out. Against this backdrop, the US Administration’s recent measures also contain elements of uncertainty or risk. First, US fiscal policy has adopted a clearly expansionary stance, in a context of maintaining GDP growth rates clearly above potential over a prolonged period. Further, the decisions announced in respect of tariffs, mainly – but not only – vis-à-vis China, might, although they still affect only a limited group of sectors, trigger retaliation, with clearly negative effects on activity and global trade. This adverse circumstance would, within the EU, be combined with the still-uncertain impact of Brexit on the UK economy and its trading partners.

If they are not to materialise, potential slippage from the projections must be monitored so that there is time to react and the objectives pursued are not compromised. In this respect, the forecasts published by the European Commission several weeks ago should be taken as a warning sign, given that a deficit almost 0.5 pp of GDP higher than this target is estimated. Should this failure to hit the target be confirmed, the structural deficit would also be impaired, making fiscal policy in 2017 procyclical, given the estimation that the output gap would have already moved into positive territory. The importance of budgetary consolidation I should now like to move on to the importance of budgetary consolidation. Since 2009 Spain has embarked on an intense process of public finances consolidation, which has entailed a reduction in the overall general government deficit of 8 pp of GDP. Achieving such an adjustment proved very difficult, given the prevailing circumstances. Yet even if the budgetary targets for 2018 are met, public finances, as projected in the draft Budget, will still be in deficit to the tune of 2.2% of GDP, while public debt will be standing 7/9  at around 97% of GDP. Given that the Spanish economy is regaining, according to most analysts, a neutral or slightly positive cyclical position, this will entail, for 2018, a structural deficit – i.e. the cyclically adjusted total deficit – higher than the budgeted figure of 2.2%.