samchain/econo-pairs-v1 huggingface dataset:
10  BIS Review 62/2008  Figure 14: Inflation and Output Gap Forecasts Forecast ForecastRange* Range*  Medium MediumTerm TermTarget Target  Output OutputGap Gap  Uncertainty UncertaintyBand Bandforfor2008 2008  1212 1010 88 Percent Percent  66 44 22 00 -2-2 -4-4 2011-I 2011-I  2010-IV 2010-IV  2010-III 2010-III  2010-II 2010-II  2010-I 2010-I  2009-IV 2009-IV  2009-III 2009-III  2009-II 2009-II  2009-I 2009-I  2008-IV 2008-IV  2008-III 2008-III  2008-II 2008-II  2008-I 2008-I  2007-IV 2007-IV  -6-6  Source: CBT *The shaded region indicates the 70 percent confidence interval for the forecast. Distinguished Guests and Members of the Press, Supply shocks have turned out to be more persistent than expected, increasing the risks to the second round effects and necessitating a significant upward revision in our inflation forecasts. Accordingly, monetary policy has already assumed a more cautious stance in order to eliminate the materialization of potential second round effects. Ensuring a steady decline in inflation will likely require tight monetary policy to be maintained for an extended period. Even then, the earliest time for reaching the 4 percent medium term targets is likely to extend beyond two years. However, this does not mean that the Central Bank will implement a looser monetary policy in the forthcoming period. On the contrary, the forecasts that I just presented are based on a tighter monetary policy stance compared to the previous period.

Moreover, we assume that electricity tariffs will be adjusted as required by the automatic pricing mechanism. These changes imply upward revisions in our forecasts by 0.9 points for end-2008, and 0.4 points for end-2009. Although weak domestic demand should limit the second round effects of the exchange rate pass-through, the first round impact of the recent depreciation is estimated to be close to 2percentage points at the end of 2008, which implies further upward revision in our forecasts. Within the framework that I have drawn up so far, we now forecast inflation to be around 9.3 percent at the end of 2008. Our medium term forecasts suggest, with 70 percent probability that, under the assumption of a measured and gradual tightening towards mid-2008 and constant policy rates thereafter for the rest of 2008, inflation will be between 4.9 and 8.5 percent (mid point 6.7) at the end of 2009 (Figure 14). Assuming a gradual moderation in food inflation, headline inflation is expected to decelerate to 4.9 percent at the end of 2010 and to 4 percent by mid-2011. We expect non-food inflation to be lower than these figures.
We have worked hard to strike a right balance between many other competing objectives, such as finding the balance between introducing incentives for banks to improve their risk management and implementing a system of prescriptive rules. We have sought a balance between complexity and risk sensitivity; between complexity and comparability; between soundness and conservatism; and between flexibility and consistency, and so on. Even the structure of the accord can be regarded as a balance among three different policy approaches: rules, discretion and market discipline. In addition to seeking a balance in the New Accord, the Committee’s work has also been guided by two other words, namely consistency and cooperation. I will have more to say about both later, but I would like to emphasize the word “consistency” now. We will achieve the full potential of a prudential standard such as the New Capital Accord only when we support it with other financial economic policies and regulations that share a consistent set of goals. Policy makers have long understood the value of monetary stability, and in recent years we have learned much about the importance of financial stability and how it interacts with our monetary policies. Interactions between the real economy and financial markets are becoming more intricate on a domestic level and more relevant to the global economy.

In undertaking this challenge, banks and supervisors recognise that having adequate levels of capital is not enough to ensure success in banking - or even long-term survival. A bank’s long-term success is determined chiefly by the quality of its management and controls, which together make up its first line of defence. The New Basel Accord seeks to capture the relationship between the adequacy of capital and the quality of risk management by relying on three important and mutually reinforcing “pillars”. These consist of, first, the minimum capital requirements; second, supervisory review; and third, market discipline. The three pillars themselves reflect the trend among bank supervisors to embrace a balanced philosophy of regulation that provides incentives to banks to manage their risks appropriately. The first pillar, for example, seeks to align capital requirements more closely to the actual risks that banks face. But the minimum requirements provide economic incentives - in the form of lower capital charges - for those banks that develop better measures for their exposures to risk and better techniques for managing their risks. Banks with more traditional exposures and less complex operations will be better able to ensure that the their capital base is sufficient for the level of credit risk they face by aligning their capital requirements with external measures of their borrowers’ creditworthiness. The most sophisticated approaches to credit or operational risk will allow banks to rely increasingly on their own assessments of risk to determine how much capital to hold.
That is why economists sometimes sound a bit like St Augustine who famously noted in his confessions “Make me chaste and continent, but not yet”. This apparent tension between the medium term and the short term is evident in the banking sector. One lesson of the last 18 months has been that in the medium term banks need to work with lower leverage and higher buffers of capital and liquidity. I have argued elsewhere that we need in future to relate these buffers to the state of the economic and financial cycle so that they expand in good times and are sufficient to cover the inevitable losses in bad times. In a sense the purpose of the recapitalisation in October was to put banks capital up to the level it should have been had such counter cyclical measures been in place. But, at the moment we are in the downswing and we need to allow the banks to use those cushions and reduce their capital ratios from the new and higher starting point. The third point I want to make is about the breadth of the policy response. Long experience has shown that interest rates are the most powerful and effective instrument for managing the economy. As a result other regulatory and fiscal measures have taken a back seat in macroeconomic management in the last 15 years.

This may curb growth in the Norwegian economy and lead to higher wage and cost inflation. Inflation is expected to pick up ahead. The upturn has also benefited the financial industry. Strong economic expansion has pushed up an already high level of lending growth. As a result, total assets in Norwegian banks and mortgage companies have risen sharply over the past decade. Growth in lending to households has been high since 2000, but growth in corporate lending showed a sharp rise towards the end of 2005. Profitability in the financial industry in Norway has been high. What is the outlook ahead? Will strong growth continue? The strong rate of growth we have witnessed in the past few years is not sustainable over time. Capacity utilisation is very high with labour shortages in many sectors. Monetary policy must be oriented to bringing inflation up to target while avoiding an overheating of the real economy. The scenario ahead, then, is a continued upward adjustment of the interest rate while curbing the high rate of economic growth. It is likely that credit growth will gradually slow, and this may also pose challenges for banks. I will return to this later. Risks to financial stability in Norway In Norges Bank’s most recent Financial Stability report, published in June, we concluded that the overall outlook for financial stability was satisfactory. We nonetheless highlighted a number of factors that might constitute a risk.
Over the course of the past millennium, perhaps longer, technological progress has held the key to rising worker wages. •  Acting in parallel to this secular rise in labour incomes has been a secular rise in workers’ skills. Levels of educational attainment have risen dramatically since the middle of the 19th century (Chart 14). As machines displaced man in conducting manual tasks, man has kept one-step-ahead of the machine by continuously skillingup to meet the new demands of new industries for new products. •  With rates of employment steady, and with real wages rising in line with productivity, labour’s share of the national income pie is little different today than in the 18th century (Chart 15). In other words, the suppliers of both labour and capital have shared, in roughly fixed proportions, in the fruits of higher incomes. •  Moreover, workers with different skills have benefitted broadly equally from these gains. The distribution of wages is little different today than at the dawn of the Industrial Revolution (Chart 16). In other words, technological progress has not obviously widened income inequalities. Viewed over the sweep of history, then, there is essentially no evidence to suggest technology has damaged jobs and plenty to suggest it has boosted wages. Technology has enriched labour, not immiserated it. Mill was right; Ricardo was wrong. Labour is not dead wood to be carved up between tasks. It is a tree whose trunk and branches have lengthened and thickened with time. The “lump of labour” fallacy is just that.

Emerging economies are now sufficiently large for growth in their economies to provide impetus to production in other regions. The question has been raised, why didn’t we – the economists – see the crisis coming? As long as the credit system has existed, crises have struck with irregular intervals. Still, we must strive to keep the intervals as large as possible. A poorly regulated financial sector is partly to blame for this crisis as for many others. In many countries, the capital requirements were reduced year by year before the crisis, to very low levels. The quality was gradually impaired. Many banks issued large quantities of hybrid capital, but the investors were not ready to bear losses. BIS central bankers’ speeches  1  In addition to low capital requirements, few countries had any macroprudential policies to speak of. Spain was an important exception. To avoid the next crisis, or at least dampen the effect, better banking regulation is necessary. First, the financial crisis revealed that banks held insufficient capital, excessive short-term market funding and inadequate liquidity buffers. The new Basel III framework sets out stricter requirements. Higher and better-quality capital will increase banks’ resilience to pronounced fluctuations in the economy without their having to tighten lending abruptly. The new rules aim to moderate growth in banking in periods of expansion. Second, the new framework includes macroprudential tools that can be applied as necessary. Banks may be subject to additional capital requirements if credit growth in the wider economy is excessive.
Despite enormous support measures, the recovery has been slow in both Europe and the United States, and few people would dare to guess what the final bill for the crisis will be. In other words, we need to do all we can to avoid ending up in a similar situation again. This involves strengthening the resilience of the financial system and counteracting the development of risks. The latest crisis also clearly demonstrated that we live in a world with a highly-integrated financial system. The financial institutions have major exposures to each other, which means that problems at one institution can spread like wildfire throughout the financial system and even between countries. With hindsight, it is easy to see that we lacked institutions and regulatory frameworks with the ability to predict and manage a global financial crisis. This lesson has led to the emergence of an entirely new policy area – macroprudential policy. Focus on the financial system as a whole – and its link to the macroeconomy Macroprudential policy can be seen as a complement to both traditional supervision and monetary policy when it comes to promoting financial stability (see slide 6). The focus changes from supervising individual institutions to analysing systemic risks in the financial sector and the links between the different players in the financial system. Macroprudential policy also aims to analyse the links, between the financial system and the macroeconomy over time.

This implies that we will continue to exert downward pressure on the yield curve by keeping our stock of asset holdings at a high level for a prolonged period of time, and we could specify it in our communication. 2/ Perhaps the most unconventional policy tool is the use of negative interest rates. Negative interest rates have their limitations; I have already stressed them in the past.vii And at our Governing Council’s meeting in Tallinn last June, we clarified these limitations in our forward guidance stating that we do not intend to lower our deposit facility rate below its current level of -0.40%. But slightly negative interest rates have their virtues. First, by removing the zero lower bound constraint on expectations of future short-term interest rates, they contribute to easing financial conditions by lowering rates along the curve, with a positive impact on the demand for credit by firms. Second, the negative deposit facility rate (DFR) positively interacts with asset purchases. Indeed, the portfolio rebalancing effect of QE is reinforced by the negative DFR, as banks with excess liquidity holdings have a stronger incentive to put their reserves to work. And, so far, we have not seen significantly detrimental effects of negative rates on the profitability of banks, notably thanks to the favourable fact that the slope of the yield curve has remained positive. 3/ Our forward guidance provides further indications as to the future path of our monetary policy; and by steering expectations, it has an impact on the yield curve.
And, we work with area schools to improve students’ understanding of monetary policy, the Fed and economics. It is also important to me that I visit different parts of our District on a regular basis and talk directly with the people who live and work here. For example, last fall I visited Western New York and saw the many positive changes helping to revitalize what has been a slow growing economy for some time. Earlier this year, I met with companies on a visit to Brooklyn and observed some of the new hi-tech jobs that are being brought to the City – a good precursor to today’s presentation. While in Brooklyn, I also visited Brownsville, a neighborhood which underscores the reality of the challenges that many face and the fact that the economy is not improving for everyone. Later this year, I have similar trips planned to Puerto Rico, the Bronx and Albany. Obtaining on-the-ground intelligence is valuable and helps shape my view of the region, the economy and my outlook on policy. As you may know, the District we cover is quite diverse. It is not just a single regional economy, but rather many different local economies. Let me talk a bit about how the different parts of our region have been doing. Regional economic conditions Since our last briefing in November, the economic recovery has been variable across the region – strong in some places but weaker in others. Let me begin with the area that has struggled the most.

I believe it is important for us to highlight these job trends and to understand their implications for our region. There have been significant and long-lasting changes to the nature of work. As a result, many middle-skilled workers displaced during the recession are likely to find that their old jobs will never come back. Furthermore, workers are increasingly facing higher skill requirements in order to land a good job. These dynamics in the labor market present a host of challenges for the region to address. However one thing is clear: workers will need more education, training and skills to take full advantage of the types of job opportunities being created in our region, as well as across the nation. So, it’s important that we work together to find ways to help people in our region adapt to these changes. I will now ask Jaison Abel to provide an update of economic conditions in our region. 2  BIS central bankers’ speeches
For those judgements to command respect, it is vital that the Committee demonstrate their determination to react to all signals about the outlook for inflation. It is common – both in the press and within central banks around the world – for discussion of the inflation outlook to be dominated by an analysis of so-called real changes in the economy such as movements in demand or supply and changes in the relative prices of imports or energy. It is true that, in trying to stabilise inflation in the short-term, the MPC will take those events into account. But we know that, beyond the short-term forecasting horizon of up to around three years, inflation has nothing to do with these developments. It is, in the old adage, the result of too much money chasing too few goods. That is why money growth rates and inflation rates are well correlated across countries and over long time horizons. Many of the great economists of the past from David Hume to Milton Friedman emphasised the link between money and the price level in the long run. 13  At present the Chief Executive is Jeff Llewellyn. BIS Review 43/2007  7  Why, then, does money not play a more prominent role in discussions of the outlook for inflation and monetary policy? Monetary developments can reflect two different causes: changes in the demand for money and changes in the supply of money. They have very different implications for inflation.

Gent Sejko: The economy and banks, present and future challenges Speech by Mr Gent Sejko, Governor of the Bank of Albania, at the round table on “The economy and banks, present and future challenges”, organised by the Bank of Albania and Government of Albania with the banking system, Tirana, 16 September 2015. *  *  *  Your Excellency Prime Minister, Honoured representatives of international institutions, Dear bank executives and representatives, This meeting seeks to once again draw the attention on non-performing loans, an issue that has been discussed extensively over the recent years. It aims at fostering the shared and concrete commitment to reduce the stock of non-performing loans, increase the financial intermediation by the banking sector and underpin Albania’s economic growth. Following, I would like to list some facts. The high level of non-performing loans has not affected the banking sector’s stability. Liquidity and capitalisation indicators remain adequate and the financial performance has been positive and improving. But, the still-high percentage of non-performing loans has contributed to a higher perception of risk by banks; in turn, they have adopted a more conservative approach to lending. Our survey data point to tightened lending standards; meanwhile, the lending volume, albeit positive, is still considered as low. The credit quality has improved during this year. The non-performing loans ratio, after peaking 25%, fell to around 21% in July 2015.
But dealing with the consequences of our “bad banking situation” is likely to be a long, slow process. Just as, if not more, important, in my view, is to look further to the future, to the economic possibilities for our grandchildren. To give them the prospect of economic stability, we must reform the three Rs of our financial system. We have an historic opportunity, and a duty, to do that. The day-to-day tasks of controlling inflation and curbing the excesses of the financial system will fall to the Bank of England. When, as it will, the economy returns to normal, our role will be to take away the punchbowl just as the next party is getting going. That won’t make us popular among bankers, politicians and even at times some of you, and it’s not supposed to. But it will, I hope, reflect the trust and confidence that the citizens of this country can place in the Old Lady of Threadneedle Street. BIS central bankers’ speeches  5

Banks should therefore maintain these surpluses in future, or should establish and increase them in line with their risk profile. As before, the SNB will regularly assess whether the countercyclical capital buffer needs to be adjusted due to mortgage and real estate market developments. If the momentum in these markets picks up again, additional measures to limit the affordability risk in mortgage lending should be taken into consideration. 2  BIS central bankers’ speeches
We have initiated the implementation of the new accord, but we are currently being pragmatic to approve only the adoption of well understood elements of Basel II that can be implemented in a safe way. Now, I would like to shift your attention to the other important pillar of banking reforms: the role of the central bank itself and its monetary policy. The contribution of the Bank of Albania to the economic reforms comes also through maintaining stable prices and helping to ensure financial stability. Over the last five years the Bank of Albania stability oriented monetary policy has generated low and stable inflation; it has also ensured that medium and long run inflation expectations have been well contained. The economic growth has been robust at around 5-6 percent of GDP, while enjoying a high degree of financial stability. Reflecting broadly on the nature of the monetary policy I would say that it has always been focused on maintaining price stability and using the control of monetary aggregates as an intermediate target. Current account and foreign exchange transactions were liberalized at the early stages of transition along with the adoption of the free floating exchange rate regime. Indirect instruments are been used to transmit interest rate and liquidity signals to the market. Repo rate has become the signaling tool for short term interest rates while repo and reverse-repo operations are used to manage liquidity.

In addition, the Bank of Albania has supplied and continues to supply the interbank market with the required amount of liquidity. BIS Review 148/2008  1  As I have mentioned in my previous statements: There’s no such thing as a free lunch! Meaning that emphasis should be put on the far-sighted perspective characterizing the Bank of Albania in the recent years. I do not refer here only to price stability, but also to the greatest challenge: banking system stability. The Supervisory Council of the Bank of Albania has constantly amended the regulatory basis creating incentives for more qualitative lending, while other decisions have aimed at providing more banking system transparency to the public, more efficient internal control and better management and governing structures. Regardless of what has been stated above, the future is of prime importance. For many reasons that I have also mentioned in my previous statements, end-year 2008 and almost the entire year 2009 will in a global context be hard, full of challenges and we will be walking through unknown paths. Overcoming this economic crisis requires time. Its solution will materialize through the resetting of a number of internal and external economic balances, the re-arrangement of many supervisory institutions and the re-design of the regulatory framework on many financial market segments. Put in this general setting, the idea that our small economy would resist this global economic tsunami with no consequences at all sounds as unrealistic. However, this issue is even more intricate.