samchain/econo-pairs-v1 huggingface dataset:
There has been no conflict between low inflation and high economic growth, as previously claimed by economists. 4  BIS central bankers’ speeches  The guidelines and the financial crisis The financial crisis in 2008 put our economic policy guidelines to a severe test. The interest rate cuts that followed from the inflation target led to a reduction in households’ annual interest expenses of around NOK 40 billion, or around 4 per cent of their disposable income. The krone depreciated and acted as a buffer. The burden on leveraged companies was eased and investment projects became profitable in an environment of lower interest rates. Altogether, monetary policy made a substantial contribution to Norway’s resilience to the crisis. BIS central bankers’ speeches  5  Well anchored inflation expectations made monetary policy effective – the reduction in Norges Bank’s key policy rate was perceived as a decline in the real interest rate. Other central banks experienced that there was little scope for reducing the real interest rate to a sufficiently low level. This downturn contrasts sharply with the downturn in the 1980s when the interest rate had to be maintained at a high level to defend the krone exchange rate. At that time, there was a lack of confidence in both monetary policy and fiscal policy. The costs were substantial. Unemployment increased, in line with that experienced in some European countries today. When the financial crisis reached Norway in 2008, we were in a much better position.

It is said that a central bank must have foresight, so that it can take action in time and contribute to the stability of the economy. Foresight on a different level was demonstrated by Nicolai Rygg long before the invasion of Norway. Two years earlier, in 1938, Rygg had assigned a secret mission to the 21-year old Ivar Borg. Every morning for several months, the young man was locked into the Bank’s vault to pack up the gold reserves. When German troops were approaching Oslo, the gold was ready to be quickly loaded onto pre-requisitioned lorries and, after a dramatic escape, was safely shipped out of the country. The gold reserves gave the government-in-exile in London the financial freedom to pursue its activities. A central bank safeguards value. Norges Bank no longer guards the nation’s gold. The gold was sold long ago. Today, the Bank manages the nation’s income from the black gold beneath our seas. This will provide financial freedom of action for future generations. A well-functioning monetary system with stability in the value of money is still at the core of Norges Bank’s public mission, as it has been for the past two hundred years. Inadequate access to reliable means of payment affects trade in goods and services and can cause the economy to stall – now, as then. At the same time, the role of the central bank has evolved over time, requiring it to adapt to a constantly changing stage.
However, a different number of borrowers may actually receive loans than were assumed when the originator sold the forward TBA contracts, a condition that could result in a different amount of gross issuance than initially expected. Given the uncertainty around agency MBS issuance, at times we adjust our purchases when market functioning indicators suggest that particular securities are less readily available for  9  This extra 25 basis points is called “excess servicing”. 10  For more information on mortgage origination process and the relationship between primary mortgage rates and yields on agency MBS, see Fuster et al (2012). 11  Originators can also choose to originate in lower coupons by retaining more “servicing”, or in a higher coupon – by paying the agency guarantee fee up front, as long as the coupon provides for the originator to still retain 25 basis points required to service the loans. 12  Purchasing non-production coupons could also have an impact on the primary mortgage rate. Purchases of non-production coupons could increase the value of those securities relative to production coupons. This may prompt investors to rebalance their portfolios by shifting their positions into the relatively undervalued production coupons, lowering yields on the production coupon relative to where it would otherwise be. 13  An increase in interest rates may result in origination activity migrating to higher coupon agency MBS.

Asset purchases promote this mandate by putting downward pressure on longer-term interest rates, supporting mortgage markets, and helping to make broader financial conditions more accommodative. The current purchases reduce interest rates and ease financial conditions through the same transmission channels as previous purchase programs. As has been widely discussed in the academic literature, one of the most important channels is the portfolio balance effect.4 This theory relies on the premise that financial assets are imperfect substitutes in investors’ portfolios, and, as a result, a rise in the demand for a particular financial asset relative to its supply – reflecting the Federal Reserve’s asset purchases, for example – will increase its price and reduce its yield. After selling that asset to the Federal Reserve, investors may rebalance their portfolios by investing in other assets, raising the prices of those assets, lowering their yields, and easing overall financial conditions. The Federal Reserve’s asset purchases are designed to remove risk from the portfolios of private investors. For example, Treasury and agency MBS purchases remove duration risk, thereby lowering longer-term interest rates and reducing private-sector borrowing costs. Furthermore, agency MBS purchases also remove prepayment risk from the market, since homeowners have the option to prepay their mortgages at any time. Investors generally demand an extra return to bear this risk, which is incorporated into agency MBS yields and passed along to borrowers in the form of higher primary mortgage rates.
With the lifting of pandemic-related restrictions in China and lower energy prices, activity among trading partners will likely be higher than we had anticipated earlier. High inflation has prompted central banks in many countries to raise policy rates to the highest levels since the 2008 financial crisis. Over the past year, foreign interest rates have risen more than Norwegian rates. Combined with the turbulence in financial markets, this has probably contributed to the depreciation of the krone. The krone is now considerably weaker than we envisaged in December. A weaker krone means an increase in prices for imported goods and services in krone terms. This will contribute to sustaining inflation in Norway. Figure 5. High employment Activity in the Norwegian economy has been higher than expected. Employment is high and unemployment is low. At the same time, we have seen an increase in labour force participation, which is a welcome development. Growth in the economy will likely be weaker ahead, but the slowdown appears to be less pronounced than projected in December. The enterprises in our regional network report slightly better prospects than before Christmas, but there are wide variations across industries. In the secondary housing market, prices have risen somewhat in recent months, but the number of homes for sale is quite high. New home sales are very low. We expect a modest decline in house prices ahead as a result of higher interest rates.

Ida Wolden Bache: Higher policy rate to bring inflation down to target Introductory statement by Ms Ida Wolden Bache, Governor of Norges Bank (Central Bank of Norway), at the press conference following Norway's announcement of the policy rate, Oslo, 23 March 2023. ***  Accompanying charts to the speech Chart 1: Policy rate raised from 2.75 to 3 percent Norges Bank's Monetary Policy and Financial Stability Committee has decided to raise the policy rate by 0.25 percentage point to 3 percent. Norges Bank's task is to keep inflation low and stable. The operational target is inflation of close to 2 percent over time. We are also mandated to keep employment as high as possible and to promote economic stability. Chart 2: Inflation markedly above target Inflation has moderated a little recently but is still too high. In February this year, consumer prices were 6.3 percent higher than one year earlier, which is markedly higher than the inflation target. Prices for many goods and services have risen more than normal. In recent months, energy prices have shown a pronounced fall. As a result, inflation has been slightly lower than expected. We have raised the policy rate substantially over the past year, and the effects of the past rate hikes are not yet fully evident. Growth in the Norwegian economy is slowing, but activity is still high and the labour market is tight. At the same time, wage growth is on the rise, and the krone exchange rate has depreciated considerably.
The floor system makes it easy to ensure that money market rates track key rate decisions. However, the system has proved to have undesirable side-effects. It makes banks passive. The market for short-term unsecured liquidity becomes very limited or disappears. The pricing mechanism – or the rates set in the money market – contains information that will not emerge if a public actor such as the central bank takes the market’s place. Consequently, we now need to set clearer boundaries between the central bank’s role as lender of last resort and settlement bank and the role of the market. In order to stimulate money market activity and reduce demand for central bank reserves, it should be more expensive for banks to hold substantial deposits in the central bank. We are therefore working on changes in our lending and deposit facilities. There are also other weaknesses in Norway’s money market. When setting household and corporate interest rates, banks not only take into account movements in the key rate, but also give weight to the money market rate, i.e. the Norwegian InterBank Offered Rate (NIBOR). In our opinion, there are shortcomings in the way this rate is set. The basis for setting the rate can be made more transparent for the benefit of other participants and it is calculated using information from only six large participants. This group does not include Norway’s largest saving banks or any international banks. We will take the initiative for improving the structure for setting NIBOR.

(2003) showed that T-Bill yields track movements in the fed funds rate more successfully since the  1990’s, while Kohn and Sack (2003) found that statements released by the FOMC significantly affect market interest rates. 4 Demiralp and Jorda (2002) found that a smaller quantity of open-market operations have been required for the  Fed to achieve its desired policy rate since 1994. 5 Hubert and Labondance (2018) found that the ECB’s forward guidance announcements persistently reduced  rates across the yield curve, with the strongest effects at the longest maturities. Moesser (2013) found greatest effects for the US at the three-year horizon. However, Chehal and Trehan (2009) found little evidence that the Bank of Canada’s forward guidance in April 2009 significantly affected market expectations of interest rates. 6 Kahnemann (2003) 7 Mishkin (2004) 8 Cruijsen et al (2010) 9 See Dincer and Eichengreen (2014). Cruijsen et al (2010) also found diminishing returns in reducing  dispersion of inflation expectations, with expectations dispersion declining initially as transparency rises but rising beyond a certain level of transparency. 10 Hayo and Neuenkirch (2018) 11 Samuelson (1994) famously likened this problem to a monkey looking at a mirror. The monkey reacts to its  mirror image, unaware that it is looking at its own reflection. 12 Morris and Shin (2018) 13 Gaballo (2018) 14 Goodhart and Lim (2011) 15 Free exchange: A little less conversation, “Can central bankers talk too much?”, The Economist, 26 Oct 2019. 5/5  BIS central bankers' speeches
BIS Review 3/2006  1  How much of the reduction in real forward rates is attributable to a drop in expected real returns and how much is a reduction in the real risk premium is still an open question. The low level of long-term real rates seems likely to reflect in part a general rise in the supply of global saving relative to demand for investment, and some have suggested this phenomenon may reflect concern about prospects for future returns on investment. However, there is also evidence from other financial market indicators that the required compensation for bearing real risk has fallen, raising the possibility that the declines in real rates are due not to pessimism (or at least not entirely), but instead to an increased appetite for, or a decreased perception of, real risk. Against this backdrop of a favorable but so far uneven productivity shock, lower inflation expectations and risk premia, greater economic and financial integration, and divergent saving and investment patterns, what are the implications of the imbalances that are the subject of this conference? It is important to note that the greater dispersion in external imbalances is the inevitable result of a fundamentally healthy change in the world economy.

The size and durability of the imbalances that characterize the world economy today reflect a myriad of different forces: from differences in actual and potential growth rates, the degree of openness of financial and product markets, the type of exchange rate regime in place, the borrowing requirements of the sovereign, the degree of financial market development, the extent of the official safety nets, to differences in attitudes toward risk and expectations about the future. The interactions of these forces are complex and vary over time. And this limits our capacity to judge the sustainable level of imbalances. On its face, the increase in the size of the U.S. current account deficit suggests that the United States has been the principal beneficiary of the increased availability of global savings and the greater apparent willingness of the world’s savers to invest outside their home countries. At the same time, however, it is not difficult to see that if the deficit continues to run at a level close to 7 percent of GDP—and most forecasts assume it will for some time—the net international investment position of the United States will deteriorate sharply, U.S. net obligations to the rest of the world will rise to a very substantial share of GDP, and a growing share of U.S. income will have to go to service those obligations.
We will need to think about the composition and structure of our balance sheet on both the asset and liability sides.19 This consideration will be important should large-scale asset purchases (LSAPs) become a more standard tool for central banks, which could happen if lower levels of equilibrium real rates imply an increasing frequency of very low overnight rates. Further, some analysts have argued that there might be a role for balance  16  To support the implementation of monetary policy and the analysis of money market conditions, the Federal Reserve began collecting transaction-level data on federal funds, Eurodollars, and certificates of deposits from a large set of domestic banks and agencies of foreign banks operating in the United States on April 1, 2014. In February 2015, the New York Fed announced plans to begin using the new data to calculate the daily federal funds effective rate and to begin publishing an overnight bank funding rate based on transactions in both federal funds and Eurodollar markets. See http://www.newyorkfed.org/markets/opolicy/operating_policy _150202.html and http://libertystreeteconomics.newyorkfed.org/2015/04/the-fr-2420-data-collection-a-newbase-for-the-fed-funds-rate.html. 17  A staff memo from 2008 suggested that in a floor system the level of excess reserves “might be on the order of $ billion but could be larger on some days.” For context, at the time, a number like $ billion would have been held up as an extremely large level of excess reserves, well beyond anything we might have seriously considered as the level of reserves needed to implement a floor on rates. See http://www.federalreserve.gov/foia/files/20080411.IoR.FOMC.Options.paper.public.pdf.

However, we still face considerable uncertainty about how market liquidity will behave in the context of a major deterioration in credit conditions or a sharp increase in volatility in equity and credit spreads, and this uncertainty is hard to quantify and therefore hard to integrate into the risk management process. •  The apparent increase in the scale of demand for exposure to credit risk relative to the growth in supply of credit has contributed to a substantial reduction in credit spreads and to some erosion in credit terms. Banks and dealers have reported pressure to reduce initial margin levels. The scale of leverage in some transactions is reported to have risen. The spread of portfolio-based margining creates the potential for greater overall leverage in the financial system, and the substantial variance in margin required by different dealers for similar portfolios suggests a wide diversity of views on how to measure the economic exposure. BIS Review 14/2006  •  Although banks hold a substantially smaller share of the overall credit risk in the system than they did twenty years ago, this shift understates the importance of the role they play in the underwriting, distribution, trading and market making of credit related assets, and it understates the importance of earnings derived from these activities to overall profitability.
Through another field experiment embedded in our American Life Panel survey modules, we have examined how respondents update their expectations after receiving information about either past food price inflation or future inflation forecasts by professional forecasters. Before the information treatment, and again after the provision of information, respondents were asked for their inflation expectations. We also asked for respondents’ priors about the information that was provided, to see whether those who have larger perception gaps are more likely to update their expectations, and if they would do so by a larger amount. We found that respondents revise their expectations in the direction predicted by theory after receiving new information. Further, the extent of revisions is correlated with the size of their perception gaps. Finally, respondents are more receptive to the new information when the uncertainty expressed in their baseline expectations is greater. All three findings are consistent with rational, Bayesian updating of expectations. Moving beyond average effects, we also found that our information treatment leads to a significant decline in the cross-sectional dispersion of inflation expectations, and causes the 4  BIS central bankers’ speeches  distribution of inflation expectations to converge toward its center – particularly for those who had high baseline expectations and were less informed ex ante. In fact, average revised expectations were nearer to actual realized CPI inflation as a result of our intervention.

BIS central bankers’ speeches  3  Finally, the household finance section contains time series of expected household income growth, expected household spending growth, changes in the amount of taxes that households expect to pay, as well as perceived credit availability – both relative to one year ago and looking ahead to one year from now. As Chart 5 indicates, household income growth expectations declined slightly to 2.3 percent in May, but remained in the middle of the narrow band (2.0 – 2.6) observed over the last twelve months. On the other hand, perceptions of credit availability continued to improve slightly in May, as shown in Chart 6. For most of our charts, the website gives additional demographic detail, breaking down each time series by income, education, age, numeracy, and region of the country. Further, for our main measures (inflation, home price changes, and earnings growth) we also report the time series of forecast uncertainty. One interesting finding – consistent with our prior research – is that forecast uncertainty about inflation is significantly higher for low education, low income, low numeracy respondents. These findings can be seen in Chart 7. Summary of past research Let me now briefly describe some of the basic research we have carried out through our consumer surveys. We have focused on two broad questions to date. First, we have investigated the connection between inflation expectations and behavior in a financially incentivized investment field experiment. In this study, survey respondents were asked for their inflation expectations.
The supply of extraordinary liquidity is one of the instruments available to Norges Bank, but it will only be used in special situations when financial stability may be threatened. We must exercise the role of provider of emergency liquidity in close cooperation with the Banking, Insurance and Securities Commission and the Ministry of Finance. In the 1980s, prices for dwellings and commercial property increased rapidly. A rapid and sharp increase in asset prices provided the basis for higher loans. This created the basis for surging, debt-financed consumption which in turn contributed to higher inflation. House prices began to fall in 1988 and equity prices started to drop in 1990. At that time, enterprises and households had a very high debt burden, and were therefore vulnerable to weaker economic developments. Many wished to reduce their debt as a result of the decline in wealth. Consumption and fixed investment were reduced. The need for financial consolidation added force to the downturn in the Norwegian economy at the end of the 1980s and the beginning of the 1990s. The crises in 1920-1928 and in 1988-1992 were far more severe than the crisis in 1899-1905. They led to a decline in output and employment and this contributed to wide fluctuations in the economy. The crisis in 1899-1905 had an impact on fixed investment in particular. Fixed investment declined sharply during the crisis after having risen prior to the crisis. The same thing happened during the crisis of 1988-1992. Not all periods with a strong upswing end in a downturn.

I know many of you have come here today to hear more about how to tap into this rapidly developing market to finance your business in the future. Now of course, as a global hub, it does not mean that all offshore RMB businesses are to be conducted only in Hong Kong. Quite the contrary. As RMB becomes more widely used and accepted by trading companies and investors worldwide, it is natural to see financial institutions providing RMB services to meet the demand of their customers. That said, even as its role evolves over time in line with market changes, we do see Hong Kong continuing to be an ideal place for companies to conduct their RMB banking and financing activities. In addition, Hong Kong will develop its ability as a RMB hub to serve a growing network of financial institutions around the world. And in this last respect we are seeing real signs of development. More foreign banks are either choosing to have a base in Hong Kong or are using RMB correspondent banking services provided by banks in Hong Kong. As of the end of March 2012, there were close to 200 banks participating in Hong Kong’s RMB clearing platform. Of these, 170 are foreign-owned or located overseas. At the same time, over 1,100 RMB correspondent accounts were maintained by overseas banks with banks in Hong Kong.