samchain/econo-pairs-v1 huggingface dataset:
We believe that our approach of setting the targets and forecasts rather than forecasts alone on a declining path involves a firmer commitment on behalf of the central bank; therefore it is more transparent and more effective in anchoring inflation expectations. 2  BIS central bankers’ speeches  Dear guests, Being a central banker, I have mostly focused on inflation and monetary policy dimension of commodity price movements. Needless to say, the course of commodity prices has implications on many other key macro variables. For example, as a net energy-commodity importer, Turkey’s dependence on energy imports makes the current account balance more sensitive to volatility in commodity prices. Recent uncertainty surrounding the energy market is not comparable to any other period in the near history. Moreover, there is a significant risk that commodity prices stay volatile due to uncertainties regarding global economy and the exceptionally loose monetary policies across the globe. Therefore, medium-term outlook for commodity prices is unusually hard to predict. In the long term, supply conditions and structural policies should adjust to stabilize the energy and other commodity prices. The recent concrete steps as part of the medium term programs in Turkey, aiming at curtailing the dependence on energy imports by switching towards domestically produced and renewable energy sources, have important implications also for decreasing the sensitivity of current account balances to international price movements.

There are nominal and real factors that affect commodity price developments. The most important real factor is due to the low price elasticity of not only supply of but also demand for these items. Because of low elasticity, a minor change in supply has the potential to affect market prices significantly. Likewise, a minor change in future real growth prospects has the effect of shifting the demand with a potential of large market price changes. This explains the real sources of commodity price volatility which is recently observed. Regarding nominal sources of volatility, most commonly cited explanations are related to monetary policies of major central banks and the structure of financial markets in commodities. I will elaborate more on real factors that is the lack of sufficient real supply increase in order to meet booming real demand from the developing world. The high growth potential in developing countries suggests that demand pressures are likely to stay with us over the years to come. Combined with the massive financial flows fueled by the exceptionally loose monetary policies, commodity price volatility will probably remain as a major challenge in the years ahead. I believe the key solution here lies in productivity increases in agriculture and energy in the medium term. Regarding agriculture, this necessity is much more evident in emerging markets – in order to keep up with the demand growth, considering the higher share of food in the consumption basket.
EMU also has implications for policy fields beyond those explicitly related to the management of the single currency. The interdependencies generated and reinforced by the introduction of the euro entail a shared responsibility for the common currency on the part of all euro area Member States. Inappropriate policy choices in one country can have an immediate impact on the common currency, for example, via the exchange rate. For the euro to be a lasting success – and to win the support of all citizens – national policymakers, businesses and trade unions will have to adapt to the conditions of a single currency. Even though this will be a gradual process, facing up to the challenges of the single currency will demand a steep learning curve for all involved. Allow me to elaborate: the European Central Bank as the single monetary authority within the euro area will have to build up and maintain a “stability culture” among the politicians and peoples of Europe. This is no easy task, despite all our efforts to explain monetary policy decisions to the public. 1  BIS Review 93/1999  Most importantly, the ECB must communicate the fundamental nature of, and justification for, its Treaty mandate to maintain price stability, not least since certain misperceptions of the goals and effects of monetary policy continue to exist. It will only be possible to fully gain the crucial support of the public for the new and so far untested currency if the ECB manages to retain its value over time.

To sum up, this isn’t likely to be a case of black (only total unemployment matters) or white (only short-term unemployment matters) with respect to compensation cost trends. I suspect that the degree of attachment falls on average as one is unemployed for longer periods of time. But, I don’t believe that this pattern of attachment is stable. It is affected by the nature of the business cycle and how and why people have become long-term unemployed. Before I turn to the implications of the economic outlook for monetary policy, let me leave you with a final thought on inflation and our inflation objective. I think there is some confusion as to whether the FOMC’s 2 percent inflation objective is a ceiling or not. My own view is that  BIS central bankers’ speeches  3  2 percent is definitely not a ceiling. Once we reach 2 percent, I would expect that we would spend as much time slightly above 2 percent as below it, recognizing that we will hardly ever be exactly at 2 percent because of the inherent volatility in prices. If inflation were to drift above 2 percent, all else equal, then we would tend to resist such a rise. But, if inflation were slightly above 2 percent even as unemployment remained far above levels consistent with maximum employment, then the unemployment consideration would dominate because we would be further from the unemployment objective than we are from the inflation objective. This should not surprise anyone.
There is also a risk that large imbalances in world trade and low employment in Europe will trigger protectionism, which could reduce growth capacity even further. A pronounced slowdown in growth in the entire OECD area is also likely to lead to markedly slower growth in China and emerging economies in Asia because exports are an important driving force behind growth in the region. This could lead to an appreciable fall in prices for oil and other commodities and weak developments in the shipping industry. Just as Norway has benefited strongly from the sharp international upswing in recent years, the Norwegian economy could be affected by such a downturn. The recent change in China’s exchange rate regime and the revaluation of the Chinese currency by 2 per cent will probably not cause substantial changes in the imbalances in world trade. At the same time, daily fluctuations of 0.3 percentage point between the yuan and the dollar are now possible. This allows for considerable variation and it cannot be ruled out that more pronounced changes in the same direction will gradually occur. So far, the Chinese authorities have maintained a stable course. It will probably be appropriate for both China and other Asian countries to shift more of their production towards domestic markets, which will reduce the large current account surpluses as well as curb the build-up of the official foreign exchange reserves. As part of this adjustment, the relative cost level will gradually increase.

Statistics Norway’s business tendency survey indicates continued favourable prospects for Norwegian manufacturing. Activity is expected to increase in service industries and the construction sector in the near term. Capacity utilisation in the Norwegian economy now appears to be close to a normal level. In manufacturing, capacity utilisation is close to its historical average. According to Norges Bank’s regional network, about 40 per cent of companies will have some or considerable difficulty in increasing production. Even though growth in the Norwegian economy has been high for a long period, substantial pressures have not yet emerged in the labour market. The rise in the number of employed in the first half of the year was fairly modest in relation to output growth. This may be due to lagged effects of the sharp fall in sickness absence through 2004. In many companies, the large increase in available person-hours was probably not fully utilised immediately. A considerable share of output growth may be the result of improved utilisation of company workforces. According to the quarterly national accounts, employment rose by 0.5 per cent from the first half of last year to the same period this year. Measured by the  1/7  Labour Force Survey (LFS), the number of employed rose by 12 000 from May to June and by a further 2 000 from June to July. The use of foreign labour has increased in the year that has passed since the enlargement of the EU.
(a) Shading is based on a score that reflects gross issuance (relative to nominal GDP) and spreads in primary markets, and spreads in secondary markets, expressed as a number of standard deviations from its historical averages, using as much data as available data from January 1998. Primary market indicators reflect the past three months, so smooth volatility. Where spreads are not available, indicators are based solely on issuance. (b)  2  Latest data point is August 2013. BIS central bankers’ speeches  Given such benign conditions it seemed natural to ask whether firms were prepared for the risk of a sudden change in conditions – in particular the possibility of a snap back in interest rates at some point. In early April, such questions to contacts usually evoked a blank response! Those who had been betting on rates rising had consistently lost money and such positions generally had been cut. There were few visible signs of any increase in hedging activity other than reports that some investors preferred floating rate rather than fixed rate products at the margin. A lot of faith seemed to be enshrined in the ability to anticipate the FOMC: that it would signal clearly and early what its strategy would be, leading to a smooth exit from its policy stance. Altogether the market was ripe for some volatility consequent to a change in the policy outlook. That volatility duly arrived. The initial catalyst was the strong US non-farm payrolls data on May 3rd after which longer term yields started to rise.

I will pick out a few of the highlights for discussion. First let me note that the “stress” so far has not involved any actual exit from accommodative policies in the advanced economies. The change in the outlook was initiated by speculation about the possibility that the FOMC might start to slightly reduce the rate at which it is adding stimulus! It would have been a more severe stress if policy rates had actually been changed. Many firms for whom maturity transformation is a major part of their business model will actually be better off if the short-term rates at which they fund themselves are relatively unchanged while longer-term rates rise. Have markets got it wrong? If so then in my view that was not obviously in the price reactions since May (although the extent of the fixed-income sell-off may turn out to have been overdone, especially for the UK) – rather it was the expectations that had become embedded prior to May which had become overly certain even if, at that time, it supported the intent of monetary policy in both the US and Europe. It is important to remember that monetary policy is about decision making under uncertainty. Considerable uncertainty. Policy makers get surprised by economic developments just like everyone else, and that news is often visible to the market before the authorities can even think about the right responses, let alone respond to them.
However, the effects of the crisis in terms of unemployment and indebtedness of the resident sectors have been sizeable and their absorption will require time. The improvements in competitiveness and the reduction of private-sector debt must continue. And this in an environment of low inflation in the euro area and of high euro exchange rates, which poses an additional difficulty. In the area of national policies, the leeway for applying demand-side policies is scant. In this respect, let me discuss in more detail the challenges ahead for fiscal policy. Fiscal policy challenges As I have already indicated, progress in the correction of European fiscal imbalances has been significant. The data for 2013 show, however, that six years after the economic crisis began, ten countries in the European Union countries had budget deficits of over 3% of GDP and public debt levels stand at record highs in many member countries. Having now emerged from the phase of financial and banking instability, the need for fiscal consolidation will continue to condition economic policy in Europe over the coming years, although the adjustments planned are on a lesser scale than those already implemented. In the case of Spain, the consolidation drive still ahead remains substantial. According to the latest Stability Programme Update, the planned reduction in the budget deficit between 2014 and 2017 is 5.5 pp of GDP, and rises to 6.4 pp of GDP in terms of decreasing the primary deficit.

Non-performing assets Private-sector non-performing assets continued to rise in 2013. This increase and the aforementioned decrease in credit explain the growth in the non-performing assets ratio. Also playing a role in this increase was the reclassification of refinanced loan portfolios required by the Banco de España in 2012. In any event, banks’ non-performing loans have a clearly cyclical component. In this respect, in line with the onset of the recovery of the economy, the latest data, which relate to early 2014, show a slight fall in non-performing assets in month-on-month terms. This trend can be expected to firm as the recovery of economic activity gathers steam. Results The banking sector in 2013 reported consolidated profit of € billion in 2013, following heavy losses in 2012, basically due to the sizeable provisions made by banks. Although provisions continued to eat up a considerable portion of profit, their relative significance in 2013 was appreciably less than in 2012. Margins and efficiency The more moderate provisions noted above helped to offset the lower margins in the 2013 income statement compared with 2012. Thus, against the background of a smaller volume of  4  BIS central bankers’ speeches  activity and of lower interest rates, net interest income (the difference between accrued interest revenue and costs) dropped by nearly 10% year-on-year in 2013.
DXY=99.6 Avg. copper=261 2018 growth (EES)=2.5  610 600 590 580 01 17  03 Mar. 610  AUG-NOV 2017 Avg. DXY=93.3 Avg. copper=303 2018 growth (EES)=2.9  05 May  07 Jul. 600 590 580  Nov.11  Sep.09  18 01  Mar.03  (*) Red line shows average of the period. Sources: Bloomberg and Central Bank of Chile. Figure 8  Actual and forecast inflation (*) (annual change, percent)  4.0  4.0  3.5  3.5  3.0  3.0  2.5  2.5  2.0  2.0  1.5  1.5  1.0  1.0 I  II  III  2017  IV  I  II  III  2018  IV  I  II  III  2019  (*) Forecast as of the first quarter of 2018. Sources: Central Bank of Chile and National Statistics Institute (INE). 10  IV  I 2020  Figure 9  Monetary policy rate (percent)  4.5  4.5  4.0  4.0  MPR  3.5  3.5  3.0  EES FBSFinancial  2.5  Business Survey  2.0  3.0 2.5 2.0  14  15  Source: Central Bank of Chile.

This risk is tempered in part because the stagnant creation of private salaried jobs and weaker growth in nominal wages continue to be causes for concern. In any case, different surveys show that the companies have improved their prospects for employment and investment in recent months, reflecting their better growth expectations (figure 10). About inflation, the Board estimates that risks are unbiased. The threats to its convergence to 3% are milder, primarily due to the way the improved economic outlook affects the closure of capacity gaps. However, the evolution of the exchange rate over the coming months will pull inflation down below the December expectations, a situation that the Board will continue to monitor with special care, given that it could have negative implications on the convergence of inflation to the target in the policy horizon. In short, as I noted at the beginning, this Report clearly shows a turning point in the business cycle that translates into an upward revision of the growth projections for 2018, giving way to lower risks for both activity and inflation. Anyway, in the baseline scenario that we have just presented, we consider that the risks for inflation and an economy that has yet to consolidate its greater dynamism make it necessary for the monetary stimulus to persist further. Therefore, we will only begin to raise the MPR when we are certain that the process of inflation converging to 3% is consolidating.
Jean-Claude Trichet: Preserving financial stability in an increasingly globalised world Keynote speech by Mr Jean-Claude Trichet, Governor of the Banque de France, at the European Financial Markets Convention (EFMC 2001), Paris, 15 June 2001. *  *  *  Ladies and Gentlemen, It is a great pleasure for me to participate in this European Financial Markets Convention. The impressively dense program of the Convention illustrates that the integration of financial markets in Europe is a major and multi-dimensional challenge. The Banque de France and the Eurosystem have a strong interest in all these issues. In particular, a safe and efficient functioning of the clearing and settlement systems of the euro area is crucial for the stability and efficiency of the financial system and for the good implementation of monetary policy. The consolidation of the market infrastructure, currently underway, will contribute to reaching these objectives through the fostering of market liquidity and the reduction of transaction costs. There is however no single path for such a consolidation: it will be up to the market to select the way which best fits its needs, while it will be up to regulators and to the Eurosystem to make sure that the resulting infrastructure is adequately safe, efficient and reliable. I would like now to share with you some views from the broader perspective of financial globalisation.

To preserve, and even restore, their specific investment approach, these investors might be more shielded from excessive short-term pressures. This objective raises considerable difficulties, because it touches on the way in which the performances of medium and long-term funds (including pension  BIS Review 54/2001  3  funds) and life insurance companies are assessed. In other words, this objective concerns the accounting standards and practices they use. It implies that some rules and standards would be adapted to the medium and long-term horizon used by these entities. I have no answer at this stage. I am only asking the question. Diversify the risk management tools of financial institutions As I mentioned earlier, even the best techniques can have adverse effects when used by too many participants. To some degree, this is perhaps what has happened to value-at-risk based techniques, which have been massively adopted by the financial industry. Because they use more or less similar parameters and suffer from the same weaknesses – for example, they took inadequate account of market liquidity at the time of the 1998 crisis –, such tools tend to give converging signals to those that use them. They thus encourage the mimetic behaviour that I discussed previously. The fact that some market participants are more sophisticated than the average is a guarantee that standardisation will remain limited, since they will develop techniques that are little used by others.
This will require the approach to be comprehensive, meeting the highest standards and in close collaboration with the industry so that the learning solutions will continue to remain relevant. The breadth of talent development solution Human capital development needs to be comprehensive and holistic in meeting the requirements for all levels. The horizon of talent development solutions has to be widened towards attracting, developing and retaining talents with required skills and expertise for the industry. It must also meet the specific requirements of the workforce career progression, from the pre-employment stage, during employment and up to the leadership positions. Talent development solutions must also be for beyond the circle of the financial services community, to include other business communities, such as legal fraternity, Government officials and IT solution providers. The advancement of the industry is also dependent on these parts of the private and public sector. Their training needs must also be met through structured training programmes to facilitate their understanding of the specificities of Islamic finance and its value propositions. Raising standards of training and education programmes The education and training programmes in Islamic finance also needs to achieve the highest quality, be credible and globally recognised. The qualifications developed need to fulfill the expectations of the industry. To ensure the standards, the required infrastructure for standard setting and accreditation for Islamic finance training and education has now been put in place.

The market share of Islamic banking assets of total banking industry has grown from only 6.9 percent in 2000 to 22 percent in 2011. The contribution of Islamic finance to the Malaysian economy has also been growing significantly, accounting for 2.1 percent share to the country’s GDP in 2009, as compared to only 0.3 percent in 2000. This has led to greater job creation where employment in Islamic financial industry accounts for 11 percent of total employment in the financial sector. On the international front, greater liberalisation of the Islamic financial system has seen greater foreign presence and participation in our Islamic financial system. There has also been an increasing trend in foreign participation in the domestic Islamic banking and takaful industry, as well as the Islamic capital market. Moving forward, it is envisaged that Islamic financial institutions in Malaysia will also expand beyond national boundaries to increase economic and financial linkages with other parts of the world. This rapid internationalisation of the financial system and technology advancement will demand a corresponding increase in quality skills and expertise of the industry. Talent upscaling will be even more important in the next decade, to steer the industry’s advancement in the increasingly complex and competitive financial ecosystem. A strong and dynamic workforce will be one of the important pillars for the industry to remain stable and competitive. It will also serve as a catalyst to spur innovation.