samchain/econo-pairs-v1 huggingface dataset:
Could these estimates be considered to amount to a commitment concerning the terminal rate? Of course, not. Again, it is just a model-based forecast based on current information. Being a forecast, this range is entirely data-dependent and may change as time goes by. However, I consider it to be a valuable tool in order to provide the public with some guidance regarding how much we expect our interest rates to adjust in order to fulfil our price stability mandate. Notice that this target-compatible terminal rate is not necessarily the same as the natural or neutral rate. The natural rate is the real interest rate that is compatible with inflation at its target. When real rates are above the natural rate, the monetary policy stance is contractionary, and when they are below, monetary policy is expansionary. The problem is that the natural rate cannot be observed. At best we have some estimates about its longrun value, which range from -1 to 0%, equivalent to 1-2% long-run nominal rates. This range is consistent with the long-run expectations of market participants, which is currently at 1.5%.16 Our current estimate of the target-compatible terminal rate is thus higher than the long-run natural rate. This implies that nominal rates will overshoot the long-run (nominal) natural rate, and hence it is expected that rates will decrease again over time I would like to flag a final consideration.

These positive developments have been fostered and supported by the pass-through of the ECB’s monetary policy measures, which have significantly eased borrowing conditions for households and firms, notably also for small and medium-sized enterprises. Considering all of the monetary policy measures taken between mid-2014 and October 2017, the overall impact on euro area growth and inflation is estimated, in both cases, to be around 1.9 percentage points cumulatively for the period between 2016 and 2020. Our measures have put the euro area economy on a solid growth pathway, driven by endogenous domestic dynamics and thus more resistant to a potential slowdown in global demand. At the same time, inflation has yet to show more convincing signs of a sustained upward adjustment. After lingering at levels well below 1% for three years, with occasional dips into negative territory, euro area headline inflation has fluctuated between 1.3% and 1.5% since May last year. Annual inflation stood at 1.3% in January. The changes in headline inflation have been driven by movements in the more volatile components, namely energy prices and, to a lesser extent, food prices. Measures of underlying inflation – which we monitor for their information content concerning inflation dynamics – have remained subdued. Inflation excluding energy and food was 1% in January, and has ranged between 0.9% and 1.2% since April 2017. Let me now focus on the factors behind these moderate inflation developments from a longerterm perspective.
We have invested considerable effort into addressing these shortcomings by increasing coordination between authorities and ensuring that national authorities also have the right incentives to cooperate in a crisis. For example: •  We have developed firm-specific cooperation agreements (CoAgs) to increase cross-border coordination and information-sharing between home and host authorities. •  We have set up Crisis Management Groups (CMGs) to agree resolution plans for globally systemically important banks. The UK is involved in CMGs for four G-SIBs as home authority and 14 as a host authority. Through CMGs we are making concrete changes in the set-up of firms that will help ensure that when faced with a crisis, authorities will stick to their ex-ante agreements. So-called ‘internal TLAC’ is a notable example – it enables losses to be passed up to the relevant part of the group. 11  6  See Financial Stability Board (2015). BIS central bankers’ speeches  •  In the European Union, resolution colleges have been established in accordance with the BRRD for cross-border firms that have operations in more than one Member State, and the UK expects to be involved in around 20 as home or host authority. Impact of reforms to date This multi-pronged programme of measures to address too big to fail is already having an effect. Ratings agencies have started to reduce their ‘government support’ uplifts for big banks. Spreads between senior and structurally subordinated debt of UK G-SIBs also suggests that resolution regimes are gaining credibility.

This isn’t an issue about a single fund or even about funds invested in a single asset class. Any incentive for investors to be at the front of the queue might be detrimental to the resilience of finance for the real economy. The emerging evidence is that companies whose existing liabilities are subject to selling pressure from funds tend to cut back new issuance and – presumably to protect their cash flow position – cut both investment and employment.17  If these new forms of finance are to give maximum support to long-term economic growth and investment, we need them to be consistent. So, after highlighting this issue in late 2015, the FPC supported the work of the Financial Stability Board (FSB) of the G20, culminating in the FSB’s January 2017 recommendation that market regulators should ensure funds’ redemption terms are consistent with their assets and investment strategy.18 Since then, global market regulators, who are at the coal face of these issues, have been turning this recommendation into new rules. Here in the UK, the FCA is finalising its own rules for funds investing in illiquid assets to strengthen liquidity management. 19  These are global issues. So macroprudential authorities across the world will need to review new global asset management rules. An assessment is needed of whether they will be effective in dampening any restriction to the supply of finance during economic downturns.
I expect that there will be further public supervisory guidance on these and other key elements of the IRB approach this year. BIS Review 5/2003  3  Operational risk is another area where the Basel Committee is developing a new regulatory capital approach that seeks to provide incentives for banks to improve their management of risk - - one that is designed to build on banks’ rapidly developing internal assessment techniques, and to accommodate industry innovation over time. Now that the industry is developing a more refined sense of operational risk - the risk of losses caused by failures in processes - the New Accord will “unbundle” this risk and allow banks to differentiate between, and manage separately, their exposures to credit, market, and operational risks. As with market and credit risk, supervisors will use a number of qualitative and quantitative criteria to ensure the integrity of the approaches that banks develop internally - but with the criteria structured to be flexible enough to allow for a wide range of qualifying approaches. By allowing banks to test and experiment with a variety of operational risk methodologies and measures, we think that the New Basel Accord’s approach to operational risk will be a true catalyst for innovation. Timing for the New Accord As you may know, the revision of the international regulatory capital framework has represented a monumental commitment on the part of both banks and supervisors worldwide and has been, so far, nearly four years in the making.

Moreover, an enabling environment for the effective use of local currencies will bring about greater cost efficiency and stability for businesses and increase demand for local currency financial products. That will, in turn, be the impetus to strengthen regional financial markets’ development. 1/2  BIS central bankers' speeches  I am pleased that the event today is made possible by all three central banks, mutually agreeing to grant regulatory flexibilities to the appointed banks under these Frameworks, enabling them to provide a wider range of financial services under their respective jurisdictions. Taking this opportunity, I wish to introduce the appointed banks in Malaysia for these Frameworks, namely, Maybank Berhad, CIMB Berhad, RHB Berhad, Public Bank Berhad, Hong Leong Bank Berhad, Bangkok Bank Berhad, United Overseas Bank (UOB) Berhad and Bank of Tokyo-Mitsubishi (BTMU) Berhad. The implementation of these Frameworks will complement our existing close partnership and cooperation as neighbors, with common objectives and shared aspirations. On this note, I look forward to witness the growth in the use Indonesian rupiah, Thai baht and Malaysian ringgit for cross-border settlement of trade between Indonesia and Malaysia, and Thailand and Malaysia, respectively. 2/2  BIS central bankers' speeches
While the merit of what has been achieved should be accorded to many, allow me briefly to acknowledge the work of the staff of the Banco de España, and most specifically the body of bank examiners, economists, lawyers and the senior managers of the supervisory, regulatory and legal arms of the Bank, on whom the greatest burden has fallen in terms of implementing the strategy approved in legislation. The fact is, the task discharged by them has perforce been complex and time-consuming. The decision by the authorities – previous and present alike – to use limited public funds in the reconstruction of the banking system was warranted because the big Spanish banks did not and do not need help and because, given the delicate situation of our country’s public finances then and now, the impact on the markets of a sharp and sudden increase in the budget deficit might have led to the collapse or intervention of the entire Spanish economy, as indeed occurred in some other countries. But with this strategy of minimising the use of public resources, the restructuring work increases exponentially and extends over time. The Spanish supervisor has had no “bad bank” with which to restructure the sector. Here we have not seen a State which, armed with taxpayers’ money, has bought bad assets from banks, thereby resolving all supervised banks’ problems at a stroke. Our Bank’s supervisory team has had to apply a strategy which has obliged it to seek predominantly private solutions.

I am not going to talk today about what banks must do, which is a lot. I will merely give some examples of the tasks outstanding for the authorities. With regard to cleaning up balance sheets and levels of capital, the latest reform has been a very important step, but nothing in life is final. If the Spanish economy eventually recovers, it will have been more than enough, but if the economy deteriorates by more than expected, then capital will have to continue to be increased and improved if banks are to remain solid. Also, new instruments to increase credit to SMEs will have to continue to be tested. Some of these were discussed at a workshop held by the Banco de España in February in collaboration with the Spanish National Securities Market Commission (CNMV). At some point political decisions will need to be taken in this area. Another area of work is to continue to reduce the size of savings bank governing bodies in order to avoid any duplication when they have transferred their financial business to banks they have set up, which must be stock-exchange listed when above a certain size. A more substantial alternative would be a law requiring savings banks to cease holding significant stakes in credit institutions, within a reasonable period, and to invest as they see fit, perhaps obtaining higher returns, in order to continue to pursue their welfare aims.
Inflation has been declining since 2001, and historic lows that had not been observed in the last 30 years were made possible in this process. Independence enables the Central Bank to shape its policies free from political pressure and daily disputes, and with a medium-term perspective focusing directly on the targets. The point reached in the fight against inflation and the achievements so far confirm the importance of an “independent structure” with respect to both the legal framework and the implementation. Therefore, not merely political circles but all sections of the public are expected to take this into account - not only as an element of discourse but in their actions as a whole. It should be borne in mind that controversy over this concept leads to the questioning of economic policies and the credibility of targets, as these discussions eventually focus on monetary policy. It is obvious that these controversies may be very costly. There is no doubt that the Central Bank will show no hesitation to continue utilizing instrumental independence in order to achieve targets and will be ready to take any risks and provide the necessary warnings. It suffices to take a look at the past five years to see why fighting inflation is so important. The high and chronic inflation led to considerable economic and social losses in Turkey in the last 30 years.

exchange rate targeting, was not really an option, given the particularities of the Romanian economy. The explicit use of the exchange rate as an anti-inflationary anchor would have been extremely risky considering the threat of an excessive current account deficit widening, as well as the low foreign exchange reserves in the first decade of the transition period. The latter would have left the central bank little room for maneuver to protect the exchange rate in the event of a speculative attack. By the mid-nineties, the literature on monetary policy strategies came to include recommendations varying from exclusive focus on monetary anchors to ignoring them altogether. In 1996, Mishkin and Estrella wondered “Is there a role for monetary aggregates in the conduct of monetary policy?” in an article that stirred heated debates. “Not really”, was the conclusion. Even the classical example of successful monetary targeting – the Bundesbank – did not apply the strategy “by the book”. They managed to keep inflation at low levels, but the monetary targets were missed in several years. The success of the Bundesbank’s strategy lay to a greater extent in the credibility of its clearly anti-inflationary stance – also reflected in announcing annual inflation targets – than in strict compliance with monetary targeting rules. Although central bankers tend to think of themselves as upholders of timeless values – as Mervyn King put it – a new fashion started to attract followers. The era of inflation targeting was dawning.
There are also other factors not connected with the expectations that push up asset prices and can temporarily lead to the increase in demand that is created by exaggerated asset prices not being  2  BIS Review 43/2002  expressed as inflation and thus not being counteracted by tighter monetary policy. A high level of credibility for the central bank can also create low and stable inflation expectations, which can mean that inflation will not rise for a period of time, despite strained resource utilisation. Deregulation on globalised markets can also temporarily subdue inflationary pressure. Is there reason to change strategy? The question is whether it is possible to raise ambitions for monetary policy to prevent financial bubbles arising? Most people advocate a strategy where asset prices are merely taken into account to the extent that they affect inflation forecasts during the normal forecast horizon. However, there are also advocates of a strategy where monetary policy also prevents the occurrence and effects of financial bubbles. Those who maintain that monetary policy cannot counteract the occurrence of financial bubbles point out that the central bank has no possibility of determining whether or not asset prices are fundamentally motivated. They also point out that it is difficult to motivate an interest rate hike that is essentially aimed at counteracting an excessively large expansion in credit and an overly high real demand if the assessments of inflation do not at the same time show that the target level will be exceeded.

At the same time, cost factors, which gained strength in recent quarters, have begun to ease, despite persisting at high levels (figure 2). The activity gap remains high and inflation continues to be exceptionally high, both signs that the adjustment process of the Chilean economy is yet to conclude. In fact, the projections that I will present to you in a few minutes continue to assume that the economy will contract further and that the annual change in GDP will be negative next year. 2  Expectations for inflation are still high too. Two-year measures remain above 3%, but with some moderation in the margin. In the one-year horizon, expectations have declined somewhat more, to between 4.5% and 6% in the surveys to experts. This compares with the values between 7% and 8% that we published our September Report (figure 3). On the cost side, the decline in global transportation fares, the reduction of bottlenecks and the continued normalization of global supply chains deserve a line. At the same time, international commodity prices have eased. In the November Business Perceptions Report, companies perceived more limited cost increases, although the volatility and level of the exchange rate were still a factor of concern. The cost expectations (IMCE) of the trade and manufacturing sectors also show a significant decline in recent months (figure 4). In terms of activity, as I mentioned, the data for the third quarter generally confirm that the economy continues its adjustment process.
Rather, she is impressively balanced and fully aware, at least in my opinion, that her legacy will be whether she can successfully complete Act V by realizing the Fed’s mandate to maintain price stability while providing the monetary means to achieve full employment. All of which means that despite the mighty efforts of Captains Bernanke and Yellen and their officers and crew, present company included, we do not know how “The Grand Experiment” drama will end. We certainly all hope it proves an inspiring history, not a tragedy. But, we will not know for some time. We will not know until the curtain drops on Act V. R.I.P? Betsy Duke had it right: Only when we have normalized monetary policy – only when the play is done – will we know if QE3 rests in peace or comes back to haunt us. Only when it is done will we know if “The Grand Experiment in Modern Monetarism” is a smash hit or a bomb or something in between. As Yogi Berra said and Lenny Kravitz sang: “It ain’t over till it’s over.” But one thing I know for sure: This speech is over. Thank you for listening. And now, Mickey, time and patience permitting, I would be happy to avoid answering any questions you and your colleagues might have.

They danced a happy jig while they decorated their balance sheets with cheaper debt and improved their margins and earnings per share  4  BIS central bankers’ speeches  through share buybacks. Slowly they began to hire new workers, and the ship of the economy started gathering momentum to steam along at an improved clip. As Act IV came to an end, the FOMC evaluated the utility of its navigational tactics, and having tentatively decided that it was on course to its desired destination, began cutting back on the amount of fuel it was pumping into the financial system. Initially, it fumbled the dialogue, but eventually the articulation of its intention was accepted, if not applauded, by its audience. Now we have entered Act V. Not until the final scene will we know whether we have achieved the auspicious outcome of arriving at the desired port of an economy that grows sufficiently to bring about full employment without giving rise to inflation. With Shakespeare, the most pleasant plays typically end in marriage. The happy outcome to our economic predicament would entail the marriage of sensible fiscal policy with prudent monetary policy, carrying the American economy to new horizons, allowing the Fed to emerge a hero. One can envision less-pleasant outcomes, however, some of them tragic.
a)  Minimum thresholds of common equity tier 1 (CET1) capital were set, as defined under the Basel III Accord, that have to be exceeded both in the comprehensive assessment, and in the baseline scenario of the stress test (8%); and another minimum threshold that has to be exceeded in the adverse scenario of the stress test (5.5%). b)  The banks falling short have to submit, within two weeks, a recapitalisation plan to be implemented within six months (if the capital shortfall arises from the asset  2  BIS central bankers’ speeches  review or from the baseline scenario in the stress test) or nine months (if the capital shortfall arises from the adverse scenario). 6. Results at the European level  The results just disclosed show that, according to the methodology used, in the banking systems as a whole that are to be supervised by the Single Supervisory Mechanism – the ECB and the National Supervisory Authorities – 25 banks have a capital shortfall, assessed against the three thresholds set (in the AQR and in the baseline and adverse scenarios of the stress test). Of these 25 banks, 12 have already increased capital in 2014 to make good the shortfall, meaning there are only 13 banks that have to submit their plans to redress capital inadequacy. In total, the shortfall of these 25 banks amounted to € billion, but bearing in mind the capital increases already made, the shortfall currently stands at only € billion. 7.

So for example, in the most recent fielding of our survey, the panel was asked:  4  BIS central bankers’ speeches  In your view, what would you say is the percent chance that the following things may happen to the rate of inflation/deflation over the one-year period between February 2013 and February 2014? Chart 6 gives you the question in full. We have been fielding the forward inflation expectation question since spring 2008, and Chart 7 contains some time-series information from the responses. We use established statistical techniques to estimate continuous probability distributions from each individual set of responses. We then find the median of the medians of the individual distributions to represent the average forward expectation and the upper and lower quartiles of the individual medians to measure disagreement across respondents. For our measure of uncertainty we report the median of the individual inter-quartile ranges. As a complement to attempting to improve the measurement of household forward inflation expectations, we have also been investigating expectations about wage growth. Because firms and workers may negotiate changes in wages to be in line with their expected rate of inflation, data on wage expectations are an additional information source for analyzing inflation dynamics and the interaction between wage and price determination. Furthermore, discrepancies between expected changes in wages and expected inflation may affect households’ financial decisions. Despite the obvious importance of wage expectations, information on wage expectations is particularly scarce.