samchain/econo-pairs-v1 huggingface dataset:
With the financial sector now stronger, the MPC judges there may be greater scope to cut rates below 0.5%. This change in assessment could itself have had some impact in reducing the downside risks to inflation expectations. To see that, consider two inflation fan charts based on simulations from the Bank’s macro-economic model.17 Monetary policy is set according to a policy rule, which weights deviations of inflation from target and output from trend. These rules only differ in their assumed lower interest rate bound.18 Chart 26 shows the inflation fan chart assuming an effective lower interest rate bound of 0.5%, whereas Chart 27 shows it with an effective lower interest rate bound of zero. Both these fan charts are negatively skewed. But by reducing the lower bound, this skew is reduced significantly. For example, at a two-year horizon the probability of deflation is reduced from around 20% to around 10%. 15  Bank of England (2015b). 16  Bank of England (2015b). 17  Because these fan charts are based on stochastic simulations, they do not match precisely the fan charts in the Inflation Report, which are based on the MPC’s best collective judgement of the balance of risks. 18  To keep things simple, the simulation does not consider the effects of QE, though in principle this could also be used to boost demand and inflation expectations. BIS central bankers’ speeches  15  Essentially, a lower effective bound gives the central bank more room for manoeuvre when responding to downside inflation news.

Chart 15: Actual and estimated UK wage growth Actual Estimated  Percent change on a year ealier 8  6  4  2  The first is simply that the lags from lower unemployment to wage growth 0 are a little longer than in the past. That might be the case because job-to-job -2 flows in the labour market have been 2004 2006 2008 2010 2012 2014 low by historical standards, only recently picking up towards pre- Sources: ONS and Bank calculations. Notes: Dashed line shows inrecession levels. If so, we might sample fitted values from an estimated wage equation. expect the recent undershoot in wages to course-correct in the period ahead, as labour market activity picks up. In essence, this is the judgement underpinning the MPC’s central view of wages in the February Inflation Report. Wage growth is projected to rise, reaching 3.4% by end-2015. In effect, wages error-correct. There is some tentative evidence of wage growth picking up over the past few months, although yesterday’s wage data were notably weaker. If this pick-up were to continue, the wage puzzle would have been benign. Indeed, with slack eroding, we might then be concerned that wage pressures could overshoot, posing upside risks to the inflation target.7 But there are other explanations of the wage puzzle which pose downside inflation risks. One is that the Phillips curve has become less steep than in the past. This would mean that a fall in unemployment might have a lower impact on wage pressures than in the past.
The Financial Stability Forum has recommended that in seeking to strengthen their financial systems countries give priority to implementing standards and codes in twelve particular areas, and the IMF and World Bank have developed a framework for assessing the progress countries are making in implementing these key standards and codes. Standards that are particularly relevant to the development of sound financial systems are evaluated under the Financial Sector Assessment Programme (FSAP), while Reports on the Observance of Standards and Codes (ROSC) provide summary assessments of a country's progress in observing standards across a range of areas. Taken together all these initiatives should contribute to greater stability at the national level. But they should also help lenders and investors better to assess the risks of lending to or investing in one country as against another, dampening potential volatility and, at the same time, giving the countries themselves stronger incentives to move toward best practice. As far as crisis prevention goes our snail has come a long way in the past few years, though of course it needs to keep moving forwards. But while we can hope to reduce the risk of crises we cannot realistically hope that they will not continue to occur. So a great deal of attention has also been paid to improving our capacity for crisis management. A major step forward was the agreement – at the G7 Summit some two years ago – on a set of principles and tools that could be applied in managing a crisis.

[5] The expansion of central bank liquidity provision during and after the global financial crisis substituted for impaired markets and thereby further reduced the need of market participants to rely on money markets for their liquidity. Instead, a substantial part of money market transactions in recent years has been driven by the demand for specific types of collateral. [6] Additionally, as a result of changes in the regulatory environment, unsecured money market transactions have become more costly in terms of bank capital and liquidity requirements. [7] This development has reinforced the shift towards secured money market transactions. Another trend is the marked shift in the types of counterparties involved in money market transactions. An increasing share of trades is cleared through central counterparties (CCPs) (right-hand side of Slide 1). CCPs mitigate counterparty risk and reduce the reliance on costly collateral by providing netting services. [8] They have been an integral part of the policy response to the shortcomings uncovered by the global  financial crisis. Beyond the use of CCPs, the share of transactions between banks and non-banks has gradually increased, whereas banks have lower incentives to transact with each other in the current environment of abundant central bank liquidity. These trends likely contributed to the relative resilience of short-term money markets since the onset of the COVID-19 pandemic. Secured transactions, a majority of which are cleared by CCPs, have been much less affected by the tensions in the spring than unsecured trades.
BIS central bankers’ speeches  3  That’s not just a private cost. It’s a social cost too. At the margin, it will force a change in the mix of economic activity. The ability to turn future cashflows into today’s investments will be curtailed. Spending will replace investment. Investment projects will have lower returns. That holds back future economic potential. Although it’s impossible to be precise, it seems that once a baseline degree of resilience has been established, more capital could actually cost the economy. We estimate that a 100bps increase in capital requirements across a banking system could result in an economic cost with net present value of 0.6% of GDP. 7 This all raises an important macroprudential question: how to best protect the real economy without the unnecessary risk of holding it back? Our answer in the UK has three parts. First, to protect the economy from the consequences of bank failure. And to do so at minimal economic cost. Effective bank resolution unlocks this. With minimum disruption to existing funding structures, it opens the door to preserving the functions of failed banks without recourse to the taxpayer. Serious progress has been made in building resolution regimes. An EU-wide legal framework is now in place. Cross-border arrangements have been stepped up. Agreements have been reached on temporary stays to closing out contracts in resolution. And the G20 agreement on Total Loss Absorbing Capacity (TLAC) standards for global systemic banks has a game-changing principle at its heart.

10  Over the three year period 2008–2010, HBoS incurred losses of £ This amounted to around 5% of its 2008 risk weighted assets £ on a Basel III basis). In the same period, RBS incurred losses on trading activities and impairments on all assets totalling £ or 5% risk weighted assets £ on Basel III basis). These banks failed because they entered the crisis with very low capital strength. On a Basel III basis, RBS is estimated to have had a CET1 ratio of just 1.97% at end 2007. HBoS had 4.1%. See FSA (2011) and Bank of England/FCA (2015). BIS central bankers’ speeches  5  That’s why, although they are well meaning, mandatory restrictions on distributions of dividends, coupons and pay when capital buffers are used can have a perverse effect. They create incentives to avoid dipping into capital buffers by taking actions that have broader economic effects. 11 Our baseline standards mean the biggest banks will be subject to a baseline capital buffer of nearly 5% of risk weighted assets, sitting on top of an 8.5% hard floor for tier 1 capital (see table 1). 12 A buffer of 5% goes beyond agreed international standards. Basel III sets a minimum buffer of 2.5% for all banks (the conservation buffer) and supplements it only for banks of global importance. We are intending to go further for big banks of domestic importance, just as the United States is going further on capital buffers for its largest banks.
•  The insurance business is premised on the law of large numbers and risk pooling – the wider the distribution of risks, the more cost-effective the cover. •  It is therefore important to allow cross-border provision of insurance services. Capital market integration In capital markets, ASEAN has made good progress in integration, starting with Thailand, Malaysia and Singapore. Concrete measures have been put in place to harmonise disclosure requirements and broaden market linkages. For investors, the ASEAN Trading Link among Thailand, Malaysia and Singapore provides a single gateway to all three exchanges. 4  BIS central bankers’ speeches  •  This means an investor in one country can buy shares in the other two markets through his local stockbroker. For issuers, Thailand, Malaysia and Singapore have adopted fully harmonised prospectus disclosure requirements, known as the ASEAN Disclosure Standards. •  This means an issuer can tap all three markets with a single set of prospectus, yielding greater efficiency and cost savings. •  A Streamlined Review Framework for such prospectuses is targeted to be implemented later this year. This will shorten the time taken for the issuer to obtain approval for a multi-jurisdictional offering and provide greater certainty on the timeto-market. For fund managers, Thailand, Malaysia and Singapore have launched the ASEAN Collective Investment Scheme Framework, which is a mutual recognition framework providing fund managers with a streamlined authorisation process for the cross-border offering of funds.

•  Banks in the region could face higher non-performing loans. They could also face reduced US Dollar funding if there are large capital outflows from ASEAN. •  But their liquidity and capital positions are generally sound and they should be able to weather this. ASEAN growth story still good Over the medium to long term, ASEAN is expected to remain among the fastest growing regions in the world. Last year, the combined GDP of ASEAN was close to $ trillion – larger than India. •  The ASEAN-4 – Indonesia, Malaysia, Thailand and the Philippines – are projected to grow by at least 4% per annum on average over the next five years. •  It could be as high as 6% if ASEAN becomes more integrated and these countries successfully implement structural reforms to raise productivity and competitiveness. For banks in ASEAN, it is not just the size and growth of the economies that matter. It is the composition of that growth and demand. Rising incomes and the agglomeration effects of urbanisation will significantly expand the ranks of the middle class in ASEAN. •  In 2010, ASEAN had a population of 600 million, with around a quarter making up the middle class. BIS central bankers’ speeches  1  •  In 2030, ASEAN will have a population of 700 million, with about two-thirds attaining middle class status. •  In other words, the size of the middle class will swell by as much as three times over two decades.
A pattern can be discerned here; on several occasions before we have underestimated US consumer demand, in spite of rather optimistic forecasts. Thus, there may be reason to revise down the forecast of households’ saving ratio in the coming years, which if so would point to higher consumption growth. The increasingly weak dollar and stronger euro should also boost US exports, particularly in Europe. In the short term, there is really only one serious concern in the US economy: that employment growth continues to be weak. This could create uncertainty among households and contribute to subduing consumption. But it is hard to believe that it would derail the current upswing. Also with regard to Europe, we began to see signs of somewhat more robust growth and greater optimism at the end of last year. In our assessment in December, we forecast a rise in growth in the years ahead. New data received since December broadly supports this assessment. Business tendency surveys for manufacturing indicate that optimism has continued to increase while industrial production has now begun to rise slowly, although for the euro area as a whole the picture is still not as unambiguous as in the US. The strong performance of the euro could also result in higher imports and lower exports than expected, which of course would have an impact on demand in the economy and growth.

Inflation rose from just over 2 per cent at the end of 2002 to just below 3.5 per cent in February, after which it fell back again. One reason that inflation rose so sharply at the beginning of the year was that electricity prices increased due to weather-related supply problems in hydroelectric power stations, while oil prices increased at the prospect of war in Iraq. During the spring energy prices then declined, as did inflation. However, it was not only developments in energy prices that caused inflation to decline during the year. The fall in prices was broader and probably due in part to lower resource utilisation and higher productivity growth. Of even greater importance, however, were falling import prices, which were a result of both weak international economic activity and the appreciation of the krona. Our forecast at the end of last year was that inflation would continue to fall over the coming months due to a return of energy prices to more normal levels. In the late spring 2004, however, inflation was expected to rise again, partly because the restraining effect of energy prices on inflation would diminish. The rise was also due to expectations of a slight rebound in import prices. However, domestic cost pressure was only expected to contribute marginally to the increase. UND1X inflation excluding energy, which at the time was considered to be the best indication of the more cyclical inflationary pressure, was forecast to be in line with the inflation target both one and two years ahead.
Denis Beau: What financial sovereignty in a digital world? Morning closing keynote speech by Mr Denis Beau, First Deputy Governor of the Bank of France, at the 8th Annual Meetings of France Payments Forum, Paris, 3 March 2020. * * * We now live in an increasingly digital world, in which technical progress makes it possible to market new goods and services that claim to simplify and enrich our lives. In the area of finance, like elsewhere, innovation seems to have followed a historical process rendering it practically invisible: As St Exupéry writes in Wind, Sand and Stars “Thus, precisely because it is perfect the machine dissembles its own existence”. Behind this apparent simplification, however, lies a profound change in financial activities, their ecosystem and their international integration. This change raises many challenges for our national and European sovereignty, which fundamentally means our ability to preserve and impose our collective choices in terms of stability, efficiency and fairness of the financial system. As a central banker and supervisor, I serve an institution that has been mandated by the legislator to help enforce these choices by ensuring the stability of the financial system, especially in the area of payment systems and means of payment, which is the subject of this conference, as well as their security and smooth functioning. These escalating challenges to our sovereignty are therefore something I cannot ignore.

This is particularly true of international payment schemes in the area of card payments (Visa, Mastercard), through which nearly two-thirds of card payments made in the European Union, especially cross-border transactions, are routed. Eighteen countries depend entirely on international schemes for the processing of their domestic transactions. Mobile payments, whose share is increasing, depend largely on mobile operating system developers such as Apple or Samsung. In addition, private systems entering in the instant payment sector are multiplying – Paypal, Lydia, and also Alipay, which will soon be launched in France, for example – at the risk of undermining bank interoperability and competition. Restrictions on the use of certain proprietary technical solutions such as NFC sensors, or payment card acceptance software for example, may also constitute an obstacle to free competition. Hence, the importance, in this context, of including collective interest projects in the European strategy for retail payments, which has reiterated the need for the EU to ensure the independence of its range of payment solutions. A key example of this is the project conducted by a group of banks to propose a solution, known as the European Payment Initiative (EPI). This is why the Banque de France and the Eurosystem as a whole are encouraging and supporting this market initiative, which would represent a further major milestone in the creation of an integrated European payment area since the creation of the SEPA area. B- Central banks may also contribute as providers of settlement services in central bank money, particularly with regard to financial intermediaries.
Over the past ten years, and using two courses of action, one covering the 2008-2012 period and the other the years 2013-2017, this Plan has enabled actions such as the following to be carried out: the Financial Education Programme for schools, which seeks to improve students’ financial literacy; the consolidation of an extensive network of public and private collaborators; the institution of a “Financial Education Day” on the first Monday of October each year; and the website finanzasparatodos (“finance for all”), which contains basic material on household finances, such as how to get to the end of the month or how to manage finances at different stages of life. Indeed, this week has seen the publication of a new plan of action for the 2018-2021 period. It includes objectives additional to the previous ones, including most notably the identification of target segments of the population not sufficiently catered for, the use of digital tools for the development of financial education initiatives and the strengthening of the Plan’s network of collaborators, which provide a boost for and outreach to people in all social circumstances and situations. To attain these objectives, analysis and use of the results of the aforementioned Survey of Financial Competences will naturally be pivotal. I have no doubt that, thus conceived, the Financial Education Plan will play an important role in alleviating the risks arising from digitalisation in the provision of financial services. Thank you very much for your attention. 7/7

Despite the extent of the changes that have occurred to date, the world is some distance from a fully open or integrated economic and financial system. This observation is important because it highlights the potential for an evolving global environment to complicate the challenge of crafting economic policy, and in particular, monetary policy. Economic theory is most comfortable with fully integrated systems in which prices and flows of goods and services along with real and financial capital responding continuously and completely to market forces. Significantly harder to capture in our models are the aspects of the world that do not fully, or quickly, adjust to market incentives, or where those incentives are hidden. Nations still retain a range of measures designed to insulate parts of the domestic economy from trade and competition. Capital controls remain in place in a substantial number of large economies and in most smaller ones. Policymakers in many economies still have implicit or explicit mandates to limit the variability of their nominal exchange rate against that of their major trading partners. These measures have the potential to distort the incentives of businesses and investors, and the resulting flows of goods, services, labor and capital. To understand the policy implications of globalization, one has to try to understand both the impact of these constraints and distortions and the  BIS Review 102/2006  1  interaction of these policies with the forces of technology and competition that are pushing or pulling economies and financial systems closer together.
There has also been some concern that the euro would make the Swiss franc obsolete as a means of payment, but this is very unlikely. These are, in a nutshell, some of the main conclusions from a Swiss perspective, on which my remarks today will focus. Moreover, I will address the consequences for the SNB’s monetary policy. In the light of current experience, the SNB will undoubtedly continue to conduct an independent monetary policy. But before turning to the implications for Switzerland in more detail, let me briefly recall the principal pros and cons of creating a monetary union. 2. Benefits and costs of a monetary union  The launch of a common currency promises benefits and causes costs. Since the benefits are mainly the result of structural improvements and the costs are due largely to the greater difficulty in steering inflation and economic activity, it is difficult to offset the advantages of a monetary union against its disadvantages. Whether a monetary union on balance creates benefits or causes costs depends on a whole range of factors, not least among them the characteristic features of the common currency area. What is theoretically uncontested is the following: in order to form a so-called optimal currency area, the member countries must be structured along similar lines or exhibit a high degree of flexibility.

If, for example, the Swiss franc appreciates by 2% and domestic inflation is 1%, prices of Swiss products are raised by 3% abroad. Yet as soon as foreign inflation exceeds the level of 3%, the competitive disadvantage for the Swiss export sector resulting from the nominal appreciation is more than compensated for. In fact, inflation has been slightly higher in Euroland. In real terms, the appreciation of the Swiss franc against the euro is therefore about 5%. It should be noted that a real appreciation of 5% over a period of more than three years is not extraordinary by historical standards. To be sure, the euro has also lost some ground against the US dollar and the yen. There are, however, some factors that point to a future rise in international demand for euros. These include the growth of the euro financial market and of its liquidity, the growing significance of the euro as a benchmark currency, and the euro area's largest trading share worldwide. Moreover, the gap between the US growth rate and that of Euroland has narrowed recently, albeit ultimately for cyclical rather than for structural reasons. The most decisive positive factors for the future exchange rate development of the single currency are, for one thing, the convincing removal of the structural and institutional weaknesses in numerous member countries and EU institutions. The willingness to continue and implement reforms will in large measure influence the growth path of Europe. For another thing, the euro rate is determined by confidence in the ECB's monetary policy.