samchain/econo-pairs-v1 huggingface dataset:
Mario Draghi: ECB press conference – introductory statement Introductory statement by Mr Mario Draghi, President of the European Central Bank, and Mr Vítor Constâncio, Vice-President of the European Central Bank, Frankfurt am Main, 8 September 2016. *  *  *  Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting of the Governing Council, which was also attended by the Commission Vice-President, Mr Dombrovskis. Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. We continue to expect them to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases. Regarding non-standard monetary policy measures, we confirm that the monthly asset purchases of € billion are intended to run until the end of March 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. Today, we assessed the economic and monetary data which had become available since our last meeting and discussed the new ECB staff macroeconomic projections. Overall, while the available evidence so far suggests resilience of the euro area economy to the continuing global economic and political uncertainty, our baseline scenario remains subject to downside risks. Our comprehensive policy measures continue to ensure supportive financing conditions and underpin the momentum of the euro area economic recovery.

Looking ahead, on the basis of current oil futures prices, inflation rates are likely to remain low over the next few months before starting to pick up towards the end of 2016, in large part owing to base effects in the annual rate of change of energy prices. Supported by our monetary policy measures and the expected economic recovery, inflation rates should increase further in 2017 and 2018. This pattern is also reflected in the September 2016 ECB staff macroeconomic projections for the euro area, which foresee annual HICP inflation at 0.2% in 2016, 1.2% in 2017 and 1.6% in 2018. In comparison with the June 2016 Eurosystem staff macroeconomic projections, the outlook for HICP inflation is broadly unchanged. Turning to the monetary analysis, broad money (M3) continued to increase at a robust pace in July 2016, with its annual rate of growth standing at 4.8%, after 5.0% in June. As in previous months, annual growth in M3 was mainly supported by its most liquid components, with the narrow monetary aggregate M1 expanding at an annual rate of 8.4% in July, after 8.7% in June. Loan dynamics followed the path of gradual recovery observed since the beginning of 2014. The annual rate of change of loans to non-financial corporations increased to 1.9% in July 2016, compared with 1.7% in June. The annual growth rate of loans to households remained stable at 1.8% in July.
On the one hand, it allows diverse experiences, arguments and points of views being brought to the table. On the other hand, there is a shared responsibility for the common decisions taken. It is not a single individual but the entire institution which is behind these decisions. To my mind both aspects are crucial for a strong and independent central bank. For these reasons accountability and transparency are both more easily and more appropriately implemented in the relationship between the public and the central bank as an institution, rather than primarily with respect to individual central bankers. In this relationship the public acts as a principal who delegates the task of monetary policy to the central bank as its agent. The act of delegation can be one-off, of a constitutional nature, or it can be periodically renewed. In both cases it is crucial that the central bank can be held accountable for its performance by the public. This can be achieved in different - more or less formal - ways. Even if no explicit contractual elements and specific sanctions are incorporated in this relationship the delegation of decision-making authority to an independent central bank establishes a kind of quasi-contractual relationship. The delegation of authority represents an act of trust on the part of the public and it represents a promise and an obligation on the part of the central bank to fulfil its mandate. So, should we - should you - have faith in central banks? The answer is yes and no.

This is the basis for central bank independence. If price stability, by contrast, were regarded as just one out of a long list of political and economic objectives - rather than as a common goal and a precondition for the successful pursuit of other objectives - then there would be no legitimacy for entrusting this task (and only this task) to independent central banks. Making value judgements when trading-off different objectives and balancing conflicting interests is the legitimate job of elected politicians with a popular mandate and not of appointed technocrats. An independent central bank thus pre-supposes a broad consensus on the “quasi-constitutional” nature of the common good of price stability. Assigning the central bank a clear overriding objective also imposes limits on its discretionary exercise of power and makes it easier for the public to hold the central bank accountable for its mandate. This is important to keep in mind if we entertain the possibility that while, yes, “money is too important to be left to the politicians” one could similarly concur with Poincaré that “money is too important to be left to central bankers” (as quoted by Milton Friedman in his 1962 essay on “Should there be an independent monetary authority?”). In other words, why should one trust central bankers more than politicians?
We are not at this stage yet; however we are working hard in this direction. I should now like to say a few words about our immediate priority tasks. First, we are making sure the measures resulting from the asset quality review are strictly applied with a focus on the capital buffer replenishment plans as prescribed for some of the banks. Second, we are finalising the plan to further enhance the work of the banking supervision. That is a continuation of the plan we have been implementing for the last almost two years now and whose fulfilment has produced good results. The new accents are: internal regulations, 1/2  BIS central bankers' speeches  information systems, and increase of resources, including appointment of the additional number of people as provided for in the original plan, which, unfortunately, takes more time than we expected. Third, we adopted a combination of measures to make the already developed system for recovery and resolution of banks fully functioning. In this area we have prioritised two sets of measures: the approval of resolution plans for the systemically important domestic banks (something that we have already done for the subsidiaries of EU banks); and the joint work with the Ministry of Finance of possibilities for the BNB to provide liquidity support.

For large banks, we are making progress on resolution planning, and this world is different to five years ago, but we are not there yet by any means. I have a background in resolving banks, and I regard having the capacity to resolve failed large banks – including the largest – as the holy grail of resolution. Unlike the legendary Holy Grail, I think there is a good reason to believe that the objective of being able to resolve large banks that fail can be within our grasp. I am very clear that when firms mess up, they should be allowed to fail, and by doing so they are putting at risk the money of their shareholders and if necessary after that those who provide debt funding according to levels of seniority. But I am also very clear that really achieving the objective of avoiding a no failure regime requires a fundamental change of mindset both inside firms, the authorities and in society more broadly. Fear of failure is an important conditioner of behaviour in a financial regulator, and achieving a change on this front depends on establishing a wide acceptance of our approach that orderly failure which does not compromise our public policy objectives is an acceptable outcome. BIS central bankers’ speeches  3  To be clear, we should be criticised where failure compromises those objectives and we could have taken steps to avoid it.
National and industry players have to work closely together to address the many challenges faced by Islamic finance as it internationalizes into new markets. This morning, let me touch on just three issues, which I am sure you will be discussing in greater depth during the course of the conference. 11. First, there is a fundamental need for further standardization and harmonization of both regulatory and Shariah standards across the Middle East and Asia. The greater use of standardized legal documentation will increase efficiency, certainty, transparency and liquidity. This would allow for easier cross-border offering of financial products that would reach a wider investor base and thereby bring about greater economies of scale and reduce transaction costs. Standardisation will also enable better risk management by ensuring that risks are clearly identified and appropriately mitigated between financial institutions and their  4  Asian Development Bank, Asian Development Outlook 2011 (April 2011). 5  Economist Intelligence Unit, “GCC trade and investment flows: The emerging-market surge”, 2011. 2  BIS central bankers’ speeches  counterparties. Shariah scholars and multilateral agencies such as the IDB, Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and Islamic Financial Services Board (IFSB) are already working to address these critical issues. As a member of the IFSB, the Monetary Authority of Singapore (MAS) will work with them in their efforts to allow greater access to an even larger global community, including non-Muslim countries. 12.

BIS central bankers’ speeches  1  need to create stronger linkages in the vital areas of trade and investment, business as well as financial linkages. There are several ways to achieve this: 6. Firstly, the Asian Development Bank (ADB) has identified growing South-South economic linkages via trade and investment as a potential driver of global growth and emphasized the need for policymakers to further reduce barriers to trade and investment4. Trade between Asia, Middle East, Africa and Latin America has developed over the past two decades but still remains a relatively small 17% proportion of world trade. Asia’s share of total trade with the GCC grew from just 10% in 1980 to 36% in 20095. Having identified this as a priority area, ASEAN and GCC foreign ministers met in Singapore last year and agreed upon a Plan of Action to boost cooperation in trade and investment, among other areas. Islamic finance can potentially play a part in facilitating more trade between Asia and the Middle East with the involvement of more global and Islamic banks from both regions. 7. Secondly, the high level of savings and wealth accumulation in the GCC and Asia should also be mobilized by the financial sector and channeled towards more productive economic uses in both regions, especially to meet the demand for national infrastructure such as power plants, hospitals, roads and rail networks. The ADB Institute estimated that Asia will need $ trillion in infrastructure investment between 2010 and 2020.
Spain’s net borrowing, although it has continued to increase, is doing so more slowly than in previous years. The changes I have described in GDP composition on the expenditure side have been feeding through to the various productive branches which, as a whole, have remained most robust in the first half of this year. Noteworthy in this respect is the strength of industrial production and the mild slowdown in construction activity. But the most notable feature on the supply side was again the abundance of labour resources, which continue acting to smooth the adjustment of activity to the buoyancy of demand, preventing cost pressures and excessive prices. The growth of consumer prices, spurred by a temporary turnaround in oil prices in the first half of the year, posted a year-onyear rate of 2.2% in August, leaving the differential with the euro area close to its historical low. However, it is very likely that, once the base effect of the energy price falls in the closing months of 2006 has been stripped out, inflation will again rise and that at the end of this year it will reach levels similar to those at end-2006. This is in fact suggested by the HICP growth flash estimate of 2.7% for September. In examining the outlook of the Spanish economy for the coming quarters, it has to be kept in mind that there are still few indicators of the situation since the turbulence erupted on international financial markets.

Miguel Fernández Ordóñez: Recent developments in the Spanish economy Testimony of Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, to the Parliamentary Budget Committee, Madrid, 9 October 2007. *  *  *  Ladies and gentlemen, My appearance before this Committee as part of the Parliamentary discussion of the State budget for 2008 comes at a time when shocks are still reverberating through some of the major international financial markets, and the attendant uncertainty inevitably bears on the analysis of the economic situation. In my appearance before the Parliamentary Committee on Financial Affairs on 17 September, I examined in detail the origin and the main implications for ECB monetary policy and for the Spanish economy of these shocks, which emerged last summer against a background of marked momentum of the economy and of world trade. A significant part of this dynamism – reflected in growth rates above 5% for world output and above 6% for trade – derives from the sound performance of the emerging economies in recent years; indeed, they seem to have been less affected by the shocks than the more developed Western economies. This is, in fact, a significant feature of the present bout of turbulence which, if I may briefly recall, originated in a financial market of a developed country (the US sub-prime mortgage market).
Low deposit rates and economic upturn in CEE after EU accession encouraged both financial institutions and individuals to move toward more risky forms of investment. As a result, real estate prices soared after 2004 and equities listed on stock exchanges reached historical highs. Since 2003 major stock exchange indexes in CEE increased on average by almost 300 percent. While part of this asset price and credit growth may be explained by structural factors often referred to as “convergence”, the observed rates of growth are clearly unsustainable and they contribute to economic imbalances. This poses additional policy challenge for central banks and financial market regulators in the region and may warrant further actions aimed at maintaining prudential lending practices. And finally one comment about the eurozone entry. According to official government and NBP forecasts Poland will fulfill all eurozone entry criteria this year (fiscal deficit, public debt, inflation, long-term interest rates). The only criterion not met will be two-year ERM2 membership without significant currency depreciation. If Poland had joined the ERM2 in the first half of 2005, as I formally proposed in January 2005, we would have been able to join the eurozone in January 2008. This opportunity has been lost, and now meeting the Maastricht criteria will become more challenging. If agflation is with us to stay, and central banks decide to keep CPI close to the target, high sacrifise ratio implied by flat Phillips curve may require significant growth slowdown. In such case meeting fiscal criteria will be challenging amid slowing tax revenues.

Three alternatives for supervision The first alternative is to give the home supervisor the role of lead supervisor with full responsibility for EU operations, branches as well as subsidiaries. This is the proposal from the European Financial Services Roundtable (EFR). The lead supervisor would be the single point of contact for reporting and would validate and authorise internal models, approve capital and liquidity allocations, decide about on-site inspections. In short, the lead supervisor would have full supervisory responsibility. The role of host supervisors would be as advisers in a college of supervisors. However, host supervisors would have no formal power. Also, when it comes to financial stability and crisis management, the lead supervisor would only have a national mandate. Thus, there would still be a need for cross-border regulatory cooperation. The second alternative, which is put forward by the two authors, is to give the home supervisor the role of lead supervisor with an EU mandate. The lead supervisor would work as in the EFR model, with the difference that the lead supervisor is given a “European mandate to ensure that the interests of all depositors/countries are taken into account”. In this model there is a decision-making agency of European Financial Supervisors at the centre, which is delegating the task of supervision to each respective home supervisor. Regarding financial stability issues, the home country central bank would also be involved, acting on behalf of the European System of Central Banks (ESCB).
BIS central bankers’ speeches  7  Table 1 The credit cycle and subsequent crises Total peaks 1880–2008*  Crisis years** within 5 % peaks with crisis years within years following a peak the following 5 years  AUS  9  6  67%  CAN  11  6  55%  DEU  9  2  22%  DNK  10  4  40%  ESP  8  5  63%  FRA  5  3  60%  GBR  9  7  78%  ITA  11  8  73%  NLD  8  1  13%  NOR  13  5  39%  SWE  10  4  40%  USA  9  6  67%  112  57  51%  * Interwar data missing for most countries. Data coverage incomplete for other countries e.g. only post-1945 data available for France. ** Defined as years in which either a banking crisis or a currency crisis or both (“twin crisis”) occur. Source: Bordo et. al. (2001) and Bank calculations. Reproduced from Aikman et al (2010). Table 2 International experience with macro-prudential tools Country  Action  Other  Sweden  Risk weight floor on residential mortgages of 15%, from an average of 5%. Followed LTV limit. Announced intention to increase to 25%. Switzerland  Sectoral capital buffer of 1% on residential mortgages  Limited impact so far. Also followed an increase in risk weights on high LTVs.

There has also been some further deregulation. For instance, state monopolies have been abolished and freedom to establish new companies with regard to, for instance, transport, communications and energy has been introduced. Changed competitive conditions thus affect productivity growth, but they can also affect price developments more directly. Despite the fact that we gained much stiffer legislation on competition in 1993, developments in this field appear to be moving slowly. Swedish prices remain higher than in other countries in several areas without explanations for this in the form of differences in VAT rates and wage levels. Increased competition can contribute to price levels converging, but this assumes that the relative price changes will be accepted and it can entail, as in the 1990s when electricity and telecommunications were deregulated, such large price reductions in some sectors that our inflation rate will be lower than that of other countries. Special interests and consumer interests Limits to competition are a clear example of how special interests dominate over general consumer interests. There are many examples of this in various areas of the Swedish economy, and in particular the construction sector. This means that we allow inefficiency to remain, which reduces growth and the development of most people’s standard of living. One interesting and very recent example of how special interests have declined concerns pharmaceutical prices.
Both opinions have high-profile advocates. As yet, we do not know who is closer to the truth and it will probably be some time until it will be possible to say with any great certainty. 9 The global level of interest rates will probably remain low for a long time Regardless of how the sluggish recovery from the financial crisis can best be explained, a central issue is that of how long the level of interest rates will be low. If the global interest rate were to start to rise fairly soon, this would increase scope for monetary policy – the problem would “solve itself”, so to say. However, empirical estimates suggest that the forces that pushed the global interest rate down will be relatively persistent and that the level of  9  One further hypothesis is that growth is being restrained by a decrease of productivity-enhancing innovations combined with various restraining forces (‘headwinds’) (see Gordon, 2102, 2015). Like secular stagnation, this is expected to affect the economy for a long time to come. However, unlike secular stagnation, there is no chronic deficit in the aggregate demand (no negative output gap), as it is the growth of potential output that is assumed to have slowed down. BIS central bankers’ speeches  7  interest rates will remain low for a fairly long time to come. 10 For example, Rachel and Smith (2015) estimate that the global real interest rate will be about or just below 1 per cent in the medium to long term.

In such situations, the central bank needs, in both word and deed, to put inflation first, in the same way as the Riksbank needed to do when the inflation target had recently been introduced at the start of the 1990s and confidence in the target needed to be built up. Of course, back then, the situation was the reverse – what was needed was to restrain inflation, not make it increase. So, to summarise my comments so far. A number of factors have led to the scope for monetary policy now seeming to be more limited than it was ten or so years ago. The most obvious of these is that the global real interest rate, that has long shown a decreasing trend, has now reached very low levels. There is also an ongoing debate on whether the actions of large, dominant central banks place clear restrictions on which monetary policy can be conducted in small countries. The main line of inquiry so far, at least for industrialised countries with floating exchange rates, is that a sufficient degree of monetary policy autonomy exists in normal cases. But under certain circumstances – such as when an  8  6  I am not going to discuss in any more detail why it is important to defend the inflation target. This has been discussed in depth elsewhere, both by me and by other representatives of the Riksbank, for example in Skingsley (2015) and Flodén (2015).