samchain/econo-pairs-v1 huggingface dataset:
The repo rate is currently 2.9% and monetary policy is expansive, which may cause real GDP to increase faster than the economy can cope with in the long run. If this is allowed to continue for too long, different types of bottleneck problems and inflationary tendencies will emerge. Such a development must be prevented. During earlier booms, in the 1970s and 1980s, the brakes were often applied too late, as a result of which the growth in production and employment came to an abrupt halt. This must not be allowed to happen this time. The purpose of monetary policy is to adjust GDP growth to the long-term growth trend, thus promoting continued growth in employment and an unemployment rate that is as low as the structure of the economy will allow. To sum up, the future for Sweden’s economy looks rather bright, and it is the task of monetary policy to try to prolong this period of favourable economic development. The “new economy” and the “long boom” A common view, mainly inspired by the debate in the US, is that this favourable development not only reflects a cyclical economic recovery, but is largely attributable to “the new economy”. Definitions of the “new economy” vary, but most people seem to mean that for various reasons the growth potential of today’s economy is higher than before. Among the reasons given for this are increased globalisation and the development and dissemination of information technology.

Since asset prices, as I have already mentioned, affect aggregate demand in the economy, interest rates will be raised when asset prices rise and vice versa. Although we know from experience that there are no guarantees, this is likely for various reasons to have a stabilising effect on asset markets. For one thing, macroeconomic stability in itself has a stabilising effect on financial markets. For another, there is less likelihood of over-reaction, since participants in the financial markets will expect central banks to pursue a policy dictated by their inflation targets. Thirdly, lowering interest rates helps to mitigate the imbalances that may occur as a result of rapid falls in asset prices. In addition, a credible inflation target allows monetary policy more room for manoeuvre when it comes to preventing a financial crisis. However, a monetary policy strategy that waits until the market collapses before responding to changes in asset prices may, at least hypothetically, pose a dilemma. The fact is that we still do not know very much about how the incentives of players in asset markets are affected by such “asymmetrical” action on the part of a central bank, i.e. being largely passive while asset prices are rising and then acting forcefully when they fall. Perhaps the devaluation policy that was pursued in Sweden in the 1970s and 1980s is a relevant parallel in this context. During that period expectations about the rate of inflation were determined by an economic policy which responded to excessive rises in prices and wages by devaluing the krona.
The financial collapse in Russia, deepening recession in Japan, the long battle – then sudden defeat last week – in Brazil’s attempt to hold its exchange rate, and fluctuating fears of possible knock-on effects on the major countries’ financial markets all contributed to an increased sense of financial fragility, which has not been easy to contain. We can, I believe, still avert a more general international financial upheaval (and the financial markets’ response to the latest developments in Brazil, as well as the beginnings of a recovery in capital flows to some countries in Asia, are reasonably encouraging in this respect). But, we are nevertheless bound to see a pronounced slowdown of world economic activity. The IMF has cut its latest (December) forecast for world growth to less than 2¼% in 1998/1999. And the risks almost certainly remain on the downside. That’s still not global slump or recession. But large parts of the world economy are in fact in recession and the prospect for the world as a whole turns very much on what happens in the major industrial countries. In essence, what we are seeing is a sharp cutback in capital flows to much of the emerging world and to some of the transition economies, enforcing on those countries a corresponding cutback in domestic demand and creating the need for an urgent improvement in their current accounts.

In the labour market this was reflected in a rise in employment of some 1.65 million to an all-time high on the latest figures (for the three months to last November) of 26.6 million. It was reflected, too, in a fall in the rate of unemployment from a peak of 10.6% (on LFS figures) to the current rate of 6.1%, which is the lowest rate for almost 20 years. As far as the regional impact is concerned, I would note that over this period unemployment in Scotland – though still higher than in the UK as a whole – has also declined – to 7.6% on the latest LFS data, compared with a peak of 10.8%; and on a claimant count basis it, too, is currently lower than for 22 years. These developments in the labour market produced only a fairly gradual pick up in pay settlements and earnings growth compared with past periods of labour market tightening – though we have, of course, been unsighted on what has happened to earnings growth more recently. And underlying retail price inflation – on the Government’s inflation target measure (RPIX) – averaged some 2¾% a year through the expansion, and is currently exactly on target at 2½%. By the time of your last dinner it was already becoming clear that overall output growth needed to moderate if we were not to run into overall capacity constraints and a pick-up in inflation.
The subsequent housing crash was exacerbated by the sharp reversals of mortgage lending 3/6  BIS central bankers' speeches  standards and home equity withdrawal, which together contributed to the severity of the Great Recession. Today, these factors seem less important because lending practices in the housing market have been much more stable in recent years. The importance and complexity of financial conditions also underscore the need for caution in following any mechanical monetary policy rule. For example, the most well-known rule—the Taylor Rule—does not explicitly take financial conditions into account in terms of its monetary policy prescription. In that rule, the federal funds rate depends only on the deviations of output from its potential and inflation from the Federal Reserve’s 2 percent objective, and on the level of the real short-term interest rate consistent with a neutral stance of monetary policy. Because the interactions can shift between financial conditions and the economic outlook—as well as between financial conditions and the federal funds rate—the absence of financial conditions in this rule can cause it to perform poorly as a guide for monetary policy. As a case in point, consider what the 1999 variant of the Taylor Rule indicated as the appropriate monetary policy setting in September 2008, just prior to the failure of Lehman Brothers.

My view is that reducing the Federal Reserve’s balance sheet and raising short-term interest rates are two different, yet related, ways of removing monetary policy accommodation. Therefore, I would expect that, when we begin to end reinvestment, we will have to consider the implications for the appropriate short-term interest rate trajectory. In conclusion, financial conditions are important. They matter enormously to monetary policy because their movements can often diverge from the trajectory of short-term rates, and because they affect economic activity and the economic outlook. While it is essential to account for financial conditions appropriately in conducting monetary policy, it is also important not to overreact to every short-term wiggle in financial markets. In addition, it is important to remember that the policy goal is not the level of financial conditions per se, but the achievement of the Federal Reserve’s dual mandate objectives. Sometimes, that will be consistent with easing financial conditions, and at other times, it will be consistent with tighter financial conditions. At all times, our focus will be on achieving our objectives of maximum sustainable employment and price stability, thereby supporting the livelihoods of households and businesses throughout the United States. Thank you for your kind attention. I would be happy to take a few questions. 1 Ozge Akinci, Nicola Cetorelli, Richard Crump, David Lucca, Jonathan McCarthy, Paolo Pesenti and Joseph Tracy  assisted in preparing these remarks.
I am aware that the quest to hold this workshop was driven by the deep conviction that a well developed and regulated payment system plays an important role in enhancing and promoting soundness in the financial system and is a catalyst for creating efficient transmission of monetary value in the economy. A well functioning and developed payment system is an essential requirement for the development of a market economy and deep financial markets. Equally important is its role in the enhancement of the conduct and transmission of monetary policy. Conversely, inefficient payment system operations can be a channel for causing distortions in the economy through inordinate delays in the monetary policy implementation and in settlement of financial transactions. This will invariably prevent the central bank from achieving its objectives of price stability and a sound financial sector. The MEFMI region still faces a lot of challenges with respect to the development and oversight of payment systems. Notable among these are: 1. Regulation of non-bank payment system providers such as mobile phone companies;  2. Regulation of innovative payment system products;  3. Ensuring the law contributes to payment system developments and operations;  4. Ensuring full utilisation of large value payment system by all stakeholders including the Government;  5. Enhancing and retaining skills in oversight of payment systems;  6. Ensuring effective cooperation between different regulatory authorities in the regulation of payment systems;  BIS Review 95/2010  1  7.

Maintaining and enhancing market competition and cooperation in the development and operation of payment systems; and  8. Ensuring consumer protection in payment system services. I am glad that this workshop is going to address these key issues and challenges with respect to the above and I am confident that the rich discussions you are going to hold and the lessons of experience you are going to share will not only enhance your skills but also bring out pertinent issues that require to be addressed when you go back to your home countries. Ladies and Gentlemen; let me take this opportunity to express my gratitude to the NorthWest University, South Africa, the South African Reserve Bank and the Reserve Bank of Zimbabwe for releasing their officials to share with us their knowledge and experience at this workshop. To all of you, I wish you the best and I encourage you to participate actively during the presentations and discussions. Use every opportunity to tap from the vast experiences of the resource persons during these five days. Last but not least, I wish to thank the MEFMI Secretariat for organising this important workshop and for choosing Zambia as the venue. With these remarks, Ladies and Gentlemen, I declare this workshop officially open. 2  BIS Review 95/2010
As you may be aware, over the course of debating and negotiating the details of the Act, some members of Congress wanted to strengthen CRA requirements, while others wanted them rolled back. In the end, of course, the two sides compromised. Some have argued that those desiring to weaken CRA prevailed because, among other things, the Act extends the interval between compliance examinations for highly rated institutions. I disagree with this perspective. Under the new law, bank holding companies cannot become financial holding companies or engage in any financial activities newly authorized by the Act unless all of their depository institutions have CRA ratings of satisfactory or better. And should any depository institution subsidiary of an approved FHC subsequently fail to maintain a satisfactory CRA rating, the FHC would be prohibited from commencing any new financial activities. In this way, the Act extends the ramifications of poor CRA performance to potential nonbank activities. It also provides powerful incentives for expansionminded companies to achieve and maintain at least satisfactory CRA ratings. In my view, this amounts to a reaffirmation of the key principles of the Community Reinvestment Act. Revision of the 1988 Basel Accord Let me move on to the Basel Committee’s major initiative to revise the Capital Accord. The primary tool of capital regulation currently is the set of minimum ratios that were devised in 1988 by the Basel Committee on Banking Supervision, which I have the honor to chair.

As we struggle with our own assessment of the impact this remarkable technology is having on the industry, supervisors must take care that our efforts to ensure the safe and sound operation of the financial markets do not stifle innovation and vitality the Internet is injecting into our economy. To that end, we are developing examination methodologies and supervisory guidelines for banks with Internet operations, and, with our colleagues in other jurisdictions, are assessing cross-border issues raised by e-banking. Of course, the other great source of new opportunity for banks and other financial institutions is the Gramm-Leach-Bliley Financial Modernization Act, which President Clinton signed into law last November. As you know, the Act repeals those provisions of the Glass-Steagall Act of 1933 and the Bank Holding Company Act of 1956 that restrict the ability of bank holding companies to affiliate with securities firms and insurance companies. The Act authorizes bank holding companies that are well-managed and well-capitalized to become “financial holding companies” (FHCs) and to engage in a diversified range of financially related activities, including commercial banking, securities dealing and underwriting, and insurance agency and underwriting activities. Passage of the Act is of truly historic significance, effecting reform that we at the Federal Reserve, and many of you, have supported for years. Together with the repeal of inter-state branching restrictions, the Act provides long-overdue modernization of our banking laws, making them more consistent with marketplace realities and the needs of today’s financial services customer.
Along with energy prices, the prices of unprocessed food products, which increased significantly in the first quarter of 2006, compared to the same period of the previous period, became the determinant in the rise in prices of the goods group (Graph 3). Graph 3. Prices of Goods (Quarterly Percentage Change)  2005 Q1  2006 Q1  10  8.81  8 6 3.61  4  2.63  1.86  1.73  2  0.80  0 -2  -0.24  -4 Goods  Energy  Unprocessed Food  -3.04 Durable Goods (Exc. Gold)  Source: TURKSTAT, CBRT. The developments in services group prices indicate that the prices in restaurant and hotel services as well as transportation prices remained considerably below the rates of increase of the same period of the previous year. Nevertheless, annual inflation rates in services, which are referred to as ‘labor  BIS Review 67/2006  3  intensive services’ and whose prices cannot be directly managed and are not directly influenced by energy prices, have followed a stable course in the past year. Moreover, the realization of price increases in rents at almost the same rates of the previous year due to the lack of immediate housing supply against increasing housing demand in the first quarter of 2006 also points to the unfavorable impact of the said prices on consumer prices throughout the year. In this context, demand developments towards services and productivity developments are being carefully monitored and we maintain our scrutiny of these developments (Graph 4). Graph 4.

Andrew Bailey: Capital and lending Article by Mr Andrew Bailey, Deputy Governor of Prudential Regulation and Chief Executive Officer of the Prudential Regulation Authority at the Bank of England, published in the Sunday Times, 5 May 2013. *  *  *  Crises often lead to big changes in public policy. Britain’s decision in the 1990s to embrace the objective of sustained low inflation and an independent central bank had its roots in the horribly high inflation of the 1970s. Now we have a big change in financial regulation rooted in a more recent crisis, the credit crunch of six years ago. Since the start of April, the financial policy committee (FPC) of the Bank of England has had a statutory duty to protect and enhance the stability of the financial system. Alongside it at the Bank is the new Prudential Regulation Authority (PRA). Its job is to promote the safety and soundness of banks, insurers and large investment firms by focusing on the problems they cause for financial stability. This is a new direction for financial regulation. The crises that lead to such big changes often follow long upswings in economic and financial conditions that are allowed to go to excess. Light touch regulation in the run-up to the start of the financial crisis in 2007 supported expansionary growth in the balance sheets of banks – too much borrowing – which was literally too good to be true.
I shall not enter that discussion but simply note that a number of important decisions have been made in the past ten to fifteen years. They include the deregulation of credit and foreign exchange markets, the reform of the tax system, changes to components of the transfers system and the enhancement of competition. All this has helped the Swedish economy to function better. Moreover, price stability is now monetary policy’s statutory objective and the Riksbank, now also formally independent, has been made accountable for this. Other steps, in the form of a far-reaching consolidation of the government budget, provide a stable and credible framework for this objective. As a further move in the new direction of economic BIS Review 99/2000  2  policy, Sweden joined the European Union in 1995. This opened up sectors that previously had been protected from international competition. Competition grew in many fields and prices for some goods and services began to be adjusted downwards towards European levels. The economic policy realignment, which began some time in the 1980s, has coincided with larger changes in the global economic environment. The Swedish economy has therefore been in a position to benefit from the developments elsewhere and so far this has led to a favourable economic path. The realignment of economic policy and the ongoing globalisation were accompanied in the 1990s by a rapid development of the new information technology, globally as well as in Sweden. The innovations have been adopted successively in various segments of our economy.

A rapidly expanding economy is liable to encounter bottleneck problems because new production facilities are not always available just when demand is rising. Experience from the 1990s suggests, however, that firms are more flexible than they used to be. This applies both to the utilisation of the existing capital stock and to investment in machinery and plant and the introduction of new  3  BIS Review 99/2000  technology when demand does pick up. The amount of unutilised capital resources may therefore not be the important factor at present. Instead, an analysis of the amount of unutilised resources in the Swedish economy should probably focus on the labour market. Another reason for this is that in a macro analysis of price trends, wages are the largest component of costs, being equivalent to over two-thirds of GDP. In an economy that is moving closer to full resource utilisation, one can accordingly expect certain phenomena to occur with a greater intensity and frequency. This refers, for instance, to companies reporting difficulties in recruiting competent labour. It can also take the form of a greater propensity to resort to disputes, both regular strikes and unlawful action. Firms are also forced to compromise when recruiting and employ less qualified personnel in order to cope with demand for goods and services. The matching of job seekers with job vacancies has functioned better than expected and to date this year the wage statistics show increases that, if anything, are slightly lower than expected.
Furthermore, we must avail of the efficiency provided by the technology, in sharing our information. A joint web-site can be established, where we can find important information, interpretations, or share its experience regarding supervisory issues or financial stability issues. When mentioning this ways of cooperation, I am not trying to neglect what is already happening and I am mindful of the fact that there is a trade-off between the advantages of such cooperation and its costs. We should also point out that Memoranda of Understanding’s can not act as a substitution for cooperation in practice. It is important we maintain close contacts with our counterparts, on exchanging regular information on general trends and issues of respective banking systems in normal times, as it serves to establish confidence for future cooperation, particularly during distress times. Otherwise, such official cooperation agreements will do little in making a real difference. Let me conclude by saying that the objective of reaching and maintaining the financial stability is not an easy task but we could contribute a lot in its achievements by enhancing our efforts to make sure that financial market institutions are performing soundly in a stable macroeconomic environment. Our contribution can be much more effective if it is properly coordinated regionally. Such cooperation will ease our efforts in improving supervision capacities, avoid cross-border regulatory arbitrage and will serve our efforts to meet our objective of integration in European financial markets.

Lower tax on productive capital or companies may lead to more companies being established and thereby raise potential output. Similarly, lower tax on labour or increased educational inputs may generate an increased supply of labour and also influence wage formation. These are examples of the numerous ways in which changes in tax and expenditure systems are likely to modify economic opportunities and promote conditions for good growth without the attendant capacity shortages that generate price pressure. Current fiscal policy The trade-off between monetary and fiscal policy — the policy mix, as we economists like to say — has improved considerably in the present decade. The rapid accumulation of government debt has ceased and the stock is now being reduced. While the consolidation of government finances has made the fiscal stance restrictive, it has been possible to lower interest rates and this in turn has stimulated investment, economic activity and employment lately. This is accordingly a considerable improvement compared with the early 1990s, for example, when factors such as very weak government finances led the Riksbank to keep interest rates up at a time when government debt was rising markedly. BIS Review 77/1999  2  Government debt and budget balance Per cent of GDP.