samchain/econo-pairs-v1 huggingface dataset:
Furthermore, as regards the comparison in Chart 10, the Energy Price Cap and the currency have not been the only pieces of news since August that might have influenced market expectations. For example, forward interest rates rose a cumulative 50bp on the (nine) days on which UK price and wage data were released. The market may also be wary about further changes in fiscal policy, and to take a skewed view of the risks in that respect. Bank of England  Page 19  Nevertheless, the graph does serve to illustrate quite how significant the moves in markets have been in the past couple of months or so. If Bank Rate really were to reach 5¼%, given reasonable policy multipliers, the cumulative impact on GDP of the entire hiking cycle would be just under 5% - of which only around one quarter has already come through (Chart 11). Chart 11: Most of the impact of cumulative tightening implied by market prices yet to come  0  Percent 0  -1  -1  -2  -2 Impact of tightening on GDP  -3  -3  -4  -4  -5 Dec 2021  Dec 2022  Dec 2023  Dec 2024  -5 Dec 2025  Chart shows estimated impact of policy tightening to date and as implied by forward market interest rates at close on 17 October, relative to a counterfactual in which Bank Rate is held constant at 0.1%.

Bank of England  Page 4  As a result, real income for the non-North Sea economy as a whole – how much our collective output is actually worth, in consumption terms – has fallen by over 5% since the end of 2019 (Chart 3). Chart 3: Real income has therefore fallen steeply relative to output  Real national income excluding North Sea relative to GVA; 2019 = 100 102  102  101  101  100  100 99  99  98 98  97  97  96  96  95  95 1997  2000  2003  2006  2009  2013  2016  2019  94 2022  Real national income excluding North Sea calculated as (Nominal GVA – North Sea profits) / Consumption deflator. Sources: ONS and Bank calculations. This may not be completely unprecedented but it’s pretty unusual. As you can see from the earlier bars in Chart 2, the post-war trend has been the opposite: compared with that of aggregate output, the average price of goods – and therefore of UK imports in aggregate – has tended to decline1. At times this has added significantly to real income growth. During the “noughties”, for example, the integration of China into the global trading system depressed global goods prices markedly. This wasn’t such a great thing if you were a manufacturer in the west, competing with this new source of production. Net buyers of goods, on the other hand, were made better off.
That is less than the average growth rate of nearly 3% in the decade before the crisis but around the average growth rate in the last 60 years. It will, according to the OECD, be the fastest growth rate among G7 economies this year. Over the period, inflation has been pushed down to around zero by the strength of sterling and by the very sharp fall in the oil price. I hesitate to describe the oil price fall as an “unfortunate event”. Much of the fall is the result of an increase of supply, the product of the oil investment cycle that accompanied oil prices staying at over $ per barrel for much of the last ten years. That will have boosted consumption and supported growth in oil-consuming countries like the UK. But the speed and size of the fall has made the shock to inflation very abrupt and exposed weaknesses in oil-producing economies. And more worryingly some of the fall over the last 18 months has been due not to an increase in supply but rather to slowing demand in emerging markets especially China. This will have had an adverse effect on world growth. There are continued signs of strength in the UK economy. Consumer confidence is near record levels and business investment intentions are strong. Housing market transactions and investment are picking up. Credit has picked up and is growing around the rate of GDP. On pre-crisis metrics, there are signs of tightening in the labour market.

One reassuring point is that the major UK banks and building societies were tested against precisely this scenario by the Bank of England in 2015 and demonstrated they had the resilience to weather such a shock and carry on lending to the UK economy. Conclusion Looking back over the last two years, I think that the slow healing story can still explain where we are and provide a guide to our future prospects. But the story has to be adapted in the face of more UK and world weakness than I had expected and this weakness might be signalling that there are deeper structural factors at work. Nonetheless, my central projection remains that the UK economy will continue to grow solidly and that inflation will return to target over the next few years. But, as always, policymakers need to be alive to the possible meaning of disappointments, to be very sensitive to the possibility of changing temperatures around them, and to the risk of unfortunate events. We have a range of tools at our disposal and should be ready to use them whichever risk materialises. BIS central bankers’ speeches  7
The reasons I will take up concern wage formation, the credibility of monetary policy, a too high real interest rate, and arbitrary reallocation from borrowers to lenders. I consider these to be serious problems. But at the same time I find some of the recent discussion on the problems with deflation – falling prices – to be exaggerated and focused on the wrong risks. Second, I wish to discuss the ability of monetary policy to prevent inflation from falling too low. Sweden is a small open economy and is affected to a great extent by international developments. This fact sometimes causes commentators to question rather resignedly whether the Riksbank can actually influence inflation. I consider this attitude to be wrong. Monetary policy determines how high average inflation will be. Having said this, I am not claiming that we can control inflation with precision. Monetary policy can prevent inflation from falling way below the target over a long period of time. It is, however, neither desirable nor possible for monetary policy to continuously hold inflation stable very close to the inflation target of 2 per cent. But let me start by commenting on where we are coming from and the current situation. Inflation has been on average 1 per cent in Sweden for the past three years, when measured in terms of the CPIF.1 The Riksbank and other analysts have had forecasts that have shown that inflation would be low over a relatively long period of time, but that it would gradually rise.

In my opinion, to achieve a better situation for coming generations, we need to create a new, lower adjusted equilibrium on the housing market. This would also contribute towards reducing the differences between insiders and outsiders – the haves and the have-nots. Furthermore, household indebtedness would gradually decrease and would no longer create economic risks in the same way. I am aware that these measures would affect my generation’s housing assets today. But my opinion is that they need to be implemented so that the housing market in Sweden can function well tomorrow. 11 [13]  References Alter, A, Feng, A and N Valckx (2018), “Understanding the macro-financial effects of household debt: A global perspective”, IMF Working Papers No 18/76. Bäckman, C and C Lutz (2018), ”The impact of interest-only loans on affordability”, Regional Science and Urban Economics. Cunliffe, J (2019), “Housing tools revisited”, Bank of England. Dermani, E, Lindé, J, and K Walentin (2016),”Is a bubble forming in Swedish housing pices?”, Economic Review 2016:2. Sveriges riksbank. Emanuelsson, R (2015), ”Supply of housing in Sweden”. Economic Review 2015:2. Sveriges riksbank. Emanuelsson, R, Katinic, G and E Spector (2018), ”Developments in the housing market and their contribution to household debt”, Economic Commentary no. 14. Sveriges Riksbank. Emanuelsson, R, Melander, O and J Molin (2015), “Financial risks in the household sector”, Economic Commentary no. 6. Sveriges Riksbank. European Commission (2019), Country Report Sweden. European Systemic Risk Board (2016). ESRB/2016/11 on medium-term vulnerabilities in the residential real estate sector of Sweden, September 2016.
Research on this problem was one of the reasons that Finn Kydland was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 2004, along with his US co-author Edward Prescott. 4. In practice, monetary policy moved to inflation targeting in 1999, when Norges Bank changed its monetary policy strategy in order to maintain a stable exchange rate. Norges Bank  Economic perspectives 2023  5  The experience of the 1970s also prompts many countries to change their views on the appropriate orientation of fiscal policy. There is less emphasis on fiscal policy as an instrument of economic stabilisation and more emphasis on fiscal sustainability. A number of countries introduce rules that place limits on government spending. Norway adopts the fiscal rule, which is designed to address long-term fiscal policy considerations but at the same time provide flexibility in helping to stabilise the economy. If a fall in demand triggers a severe economic downturn, reducing the policy rate is not always enough. Fiscal policy can then make a contribution. And when there is little spare capacity and inflation is high, it is advantageous when monetary policy and fiscal policy act in concert. At the same time, monetary and fiscal policy differ in their effects. The policy rate affects the economy broadly and primarily impacts aggregate demand. Fiscal policy measures can, within budgetary limits, be more targeted when groups or sectors are hit especially hard. Economic stability also depends on a well-functioning wage determination process. Wage determination in Norway is highly coordinated.

Even with a sustained extra currency income in the form of the return on the Petroleum Fund, the main share of Norwegian imports must be financed using revenues deriving from exports of goods and services from mainland Norway. This places demands on profitability in exposed industries. In the long run, cost competitiveness must be adapted to the need for financing imports and securing balance in the external economy. Imports currently account for more than 30 per cent of GDP in Norway. The return on the Petroleum Fund will range between 4-5 per cent of GDP when the bulk of our oil resources have been extracted and converted into financial wealth. This means that no more than close to 1/5 of imports can be financed on the basis of oil in the long run. In other words, if the share of imports is to remain at the current level, a sizeable internationally exposed sector will be needed to finance imports. Both our petroleum wealth and financial wealth are sizeable. However, it is the discounted value of our own labour that is our predominant asset. Our livelihood essentially depends, and will continue to depend in the future, on our ability to produce goods and services efficiently through our labour, and to use our creativity and innovation to become ever more efficient.
Last year Lithuania’s finance minister, Rimantas Šadžius, reportedly said, “we already have the euro, it just has a different name”. What he wanted to express by that was that Lithuania’s monetary policy was significantly shaped by the ECB. From 2002 the litas was pegged to the exchange rate of the euro, and before that to the US dollar. On Thursday Vitas Vasiliauskas, Chairman of the Board of Lietuvos bankas, was allowed to have a say for the first time in the monetary policy of the second-largest economy in the world. In times of highly interdependent national economies, sharing sovereignty means gaining influence. And precisely this common decision-making for the benefit of all is a prerequisite for Monetary Union being able to bring its members more stability and prosperity. This is particularly true when it comes to creating a single European financial market. It is this aspect which I would like to go into in more detail today. At the moment, as a logical consequence of the banking union created last year, a capital markets union is under discussion. 2  BIS central bankers’ speeches  Why Europe needs a capital markets union Europe’s economy is characterised by small and medium-sized enterprises (SMEs). They account for two out of three jobs and generate around 60% of value added. And precisely these enterprises finance themselves almost exclusively via the domestic banking sector. In most countries, however, the majority of loans to enterprises are granted by only a few banks.

That is why a healthy banking sector remains a prerequisite for SMEs to be able to access loans. Over the medium to long term, however, the desire is not to have to rely on this sector alone, but to foster alternative methods of financing, for example by appropriately regulating the securitisation market. Second, spreading risk means that financial markets within a monetary union should actually function independently of national borders. Economic shocks can then be better absorbed because countries receive a certain amount of protection from the private sector. If, for example, part of a country’s assets are held by foreign investors, these investors will also bear a share of the consequences of an economic shock. Such shocks thus have a reduced impact on the domestic economy. A country can also reduce its vulnerability to shocks by holding a geographically diversified portfolio itself. Ultimately, integrated financial markets help to cushion national shocks because companies and consumers can also fall back on foreign capital markets and banks in times of crisis. Such risk-sharing with the private sector works very well In the United States. According to scientific estimates, around two-thirds of an economic shock are smoothed by capital and credit markets. 3 The European financial markets are much less effective at absorbing such shocks and their ability to do so deteriorated even further during the course of the crisis. 4  3  Sørensen, B. E. and Yosha, O.,”Channels of interstate risk sharing: United States 1963–1990”, Quarterly Journal of Economics, 111(4), 1996.
6 Seven awkward questions, 17/01/19 - https://www.bankofengland.co.uk/speech/2019/sam-woods-secondary-competition-objectivefive-years-on 3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  That is the purpose of the Consultation Paper (CP) we’re launching today: we want to ensure there are ‘no surprises’ from the regulator whether you’re a new bank, a mid-tier bank or on the path between the two. We want to give you the map that gets you up the mountain. To be clear, not all firms will aspire to reach the summit, and that’s just fine. Many will find a sustainable position part way up. But we hope – for those firms with lofty ambitions – that over time the mountain can accommodate many more firms at increasingly high altitudes. The Covid-fog Now, when we embarked on writing this CP – to draw together all the various expectations of growing firms into one coherent guide – we didn’t expect the next major test of the banking sector to come so soon and on such a scale. But I am pleased to say that the banking industry has risen to the challenge of the Covid stress - both in terms of maintaining critical services to customers, and in helping to support individuals and to fund businesses large and small through their period of stress. The crisis is by no means over, but the first phase has shown the capacity of the sector to contribute to the greater good.

Barriers to growth are in many ways the inevitable corollary of our lowering the barriers to getting onto the mountain in the first place and of us introducing proportionality into the regime. So ironically our actions to support competition risk creating the very barriers that firms then find it hard to overcome. 10  ‘Credit Union meets robot’: https://www.bankofengland.co.uk/speech/2019/sam-woods-speech-at-mansion-house-london 9  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  9  Over the past few years, our focus has been on getting more banks onto the mountain at base camp. But as our next step, our focus has turned to ascending the mountain. And I hope the draft Supervisory Statement we have issued today goes some way to making the path up the mountain easier for you all to navigate. Our focus is also on the gradient of the climb and doing our best to ensure those rock-faces are traversable. And, where they prove not to be, to ensure there is a safe way down. In parallel, we will continue to work hard on the design of our prudential regime, including thinking about whether we can introduce a simpler mountain for smaller firms. But in doing so, we will not compromise safety and soundness nor create insurmountable barriers between mountains in the range. 10  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  10
It is clear that regulatory improvements will eventually be needed so that the financial industry can assume a greater role in safeguarding their own credibility. The credibility of central banks is also being tested in this situation. In dramatic cases, such as Iceland, we are again seeing an example of runaway inflation when confidence in government finances is severely impaired. In this situation, inflation targeting at the central bank of Iceland did not suffice. In Iceland, the problems stemmed from an over-dimensioned financial industry and fundamental macroeconomic imbalances. When the banks encountered problems, the authorities provided support in an attempt to secure a functioning financial system. As the Icelandic state did not have the financial strength to take over the banks’ total commitments, confidence in its currency and monetary policy was also shattered without the central bank being able to redress the situation. The financial crisis is a global one, and the Norwegian economy will be affected. However, our country is in a sound position to curb crisis-related effects. In Norway, government finances are healthy, the banking system is solid and there is confidence that monetary policy will continue to maintain a stable value of money. This means that we can use the interest rate actively. We have already reduced it in two increments by a total of 1 percentage point, and we are willing to use the interest rate to a further extent if necessary. Central banks still face many unknowns about economic behaviour.

The central bank will ensure that economic agents do not believe that inflation of 5 per cent has become the normal level,  29  The new recognition that policy should be based on confidence rather than a series of surprises reflects the influence of theoretical developments on practical policy, c.f. footnote 24. 30  In recent times, central banks throughout the world have become more independent but at the same time more predictable in their communication with other economic agents. This is also related to the new recognition referred to in footnote 24. 31  Norges Bank reports on the conduct of monetary policy in its Monetary Policy Report and Annual Report. Norges Bank’s reporting obligations are set out in § 75c of the Constitution and § 3 of the Norges Bank Act. The Annual Report is submitted to the Ministry of Finance, presented to the King in Council and communicated to the Storting in the Government Credit Report. The Governor of Norges Bank also appears at an open hearing of the Standing Committee on Finance and Economic Affairs. 32  The objective of EMU is consumer price stability in member countries as a whole, rather than stable prices in the individual country. The arguments for a stable value of money are the same as for Norway. 8  BIS Review 136/2008  thereby preventing such a belief from affecting their behaviour. Under an inflation targeting regime, the central bank will accept, when shocks occur, a price increase without having to reduce other prices.
The use of technology such as mobile and internet banking have enabled financial institutions to provide quality and affordable financial services to a regional SME client base. It is paramount for SMEs to embrace these technological enhancements. This includes the adoption of end-to-end supply chain management solutions that integrate the production and financial flows of SME activities, allowing for greater expansion into regional production networks. Together with digitalisation, the financial integration process will catalyse the convergence of institutional frameworks across ASEAN countries to create a more effective regional financing ecosystem. Such institutional infrastructures and instruments include credit guarantee schemes and credit and collateral registries. Another example is the ASEAN SME Working Group’s methodology for the ASEAN Benchmark for SME Credit Rating to facilitate the establishment of credit bureaus in ASEAN member states. Through these credit bureaus,  2  As estimated by the Asian Development Bank. BIS central bankers’ speeches  3  financial institutions would have wider access to reliable credit records of SMEs, thereby increasing the access to financing for the SMEs. The promotion of deeper financial inclusion can be regarded as the final mile in enhancing and enriching the regional financial integration process. The ASEAN Finance Ministers’ and Central Bank Governors’ Meeting in March this year elevated financial inclusion as a regional policy priority. Indeed, ASEAN will continue to coordinate and intensify efforts to advance financial inclusion, including addressing cross-border financing issues for SME trade financing and investments.

Capital adequacy indicators in Romania and the EU (average) 20  Figure 10. Stress test results for credit institutions (September 2017)  percent  10  19  percent  0  18 -10 17 -20  16 15  -30  14 -40  total capital ratio Tier 1 capital ratio total capital ratio – EU average Tier 1 capital ratio – EU average Source: NBR, EBA  -50 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28  Sep. 17  Jun. 17  Mar. 17  Dec. 16  Sep. 16  Jun. 16  Mar. 16  Dec. 15  Sep. 15  Jun. 15  Mar. 15  Dec. 14  13  potential impact on own funds median value of impact impact at system level Source: NBR 8  Figure 11. Value of LCR* (September 2017) percent  percent  Figure 12.