samchain/econo-pairs-v1 huggingface dataset:
Remember, the important thing here is that CPI inflation is 2 per cent. So the Riksbank should actually have raised rather than cut the repo rate. The direct effect would then have been that CPI inflation would have been higher through the effects on the interest-expenditure component of the CPI. Of course, this would also have had a dampening effect on activity in the economy and on the inflation rate that is not affected directly by changes in mortgage rates, namely CPIF inflation. But this could have been compensated with more and larger interest rate increases and CPI inflation could thus have been kept at 2 per cent. CPIF inflation would then fall increasingly, but this would not matter as the calculation assumes that it is solely the average CPI inflation rate that creates the unnecessary unemployment. Before anyone thinks that I have gone over to the dark side, let me say that this would of course have been an absurd and destructive monetary policy. But it illustrates the difficulty of interpreting the results of calculations that solely focus on the average of CPI inflation. Söderström and Vredin (2013) discuss this, among other things, in an analysis of inflation, unemployment and monetary policy. One conclusion of their analysis is that the link between CPI inflation and unemployment has many causes and that it in itself therefore does not give much guidance as to how well monetary policy has been conducted.

Gent Sejko: Overview of Albania’s latest monetary and economic developments and outlook Speech by Mr Gent Sejko, Governor of the Bank of Albania, on the Monetary Policy Decision of the Bank of Albania’s Supervisory Council, Tirana, 4 March 2015. *  *  *  Today, on the 4 of March 2015, the Supervisory Council of the Bank of Albania reviewed and approved the Interim Monetary Policy Report. After scrutinising the current and expected performance of inflation and other economic indicators, the Supervisory Council of the Bank of Albania decided to keep the key interest rate unchanged at 2.0%. *** The domestic and external economic environment has generated low inflationary pressures. According to INSTAT data, annual inflation was 1.3% in January, up from the rate registered in December. Inflation fluctuations in the last two months have been determined mainly by the volatility in food prices. The fall in food inflation in December and its rise in January were driven by developments in international markets and the performance of domestic production. In parallel, the decline in oil prices has generated downward pressure on inflation. Prices of other consumer goods’ categories did not display any significant change. The rise in inflation in January was in line with our projections; however, the rate of inflation remains below Bank of Albania’s target. The Bank of Albania evaluates that inflationary pressures will increase gradually and inflation will return to target within the medium term.
On the one hand, there is a danger that the current high level of inflation becomes embedded in wage and price setting behaviour, imparting greater persistence to the upside deviation of inflation from target in the coming years. On the other hand, the squeeze on real household incomes coming from higher energy and goods prices threatens to weigh heavily on demand, activity and employment, potentially adding to the undershoot of the inflation target forecast by the MPC at a three-year horizon. As has been emphasised in recent Bank communication, the MPC seeks to follow the narrow path between these two risks, while returning inflation to its 2% target in a sustainable manner. [5] The weight attached to the risks on either side of this narrow path will vary across people and through time, evolving as new economic data are published and analysed. The recent discussion of UK monetary policy – and the absence of unanimity in MPC votes – should be understood in that light. In today’s talk, I aim to flesh out the framework established in the MPC’s recent forecasts and reports for assessing how to identify and follow this narrow path. [6] These forecasts and reports represent the ‘best collective judgement’ of the MPC as a whole. But I will also take this opportunity to flag where I differ from that ‘best collective judgement’.

This means that we will assess the effects of these measures and adapt them, if necessary: (1) to confirm that they continue to fulfil their monetary policy objectives; (2) to ensure – within our mandate – that the relevant measures continue to support the decarbonisation path to reach the goals of the Paris Agreement and the EU climate neutrality objectives; (3) to respond to future improvements in climate data and climate risk modelling or changes in regulation; and (4) to look beyond climate and address additional environmental challenges, within our mandate. While I understand it is not a specific topic covered in today's conference, a similar commitment to fully incorporate climate-related and environmental risks applies to our banking supervision tasks and responsibilities. In addition to the climate stress test that was concluded by ECB Banking Supervision earlier this year, we will soon publish the results of our thematic review. As part of this exercise, our core banking supervision teams – Joint Supervisory Teams – thoroughly assessed to what extent banks' risk management practices for climate-related and environmental risks live up to the supervisory expectations we published in 2020. We conducted this exercise to assess where banks stand with regard to our expectations and to highlight any gaps they urgently need to close. We will also take the opportunity to identify and share best practices to help banks close any gaps identified.
As a working assumption, the real exchange rate is assumed to remain fairly unchanged, because it is estimated to be now within the range believed to be consistent with its long-term fundamentals. Finally, the baseline scenario also uses as a working assumption that, over the short term, the MPR will be stable. The baseline scenario reflects those events that are believed to be the most likely with the information at hand at the statistical closing of the Report. There are risk scenarios, however, which, if materialized, may reshape the macroeconomic environment – in some cases, significantly – and, therefore, may alter the course of monetary policy. On this opportunity, having evaluated the alternative scenarios, the Board estimates that the risk balance is downward biased for output, and unbiased for inflation. The greater risk originates abroad, because of the situation in the Eurozone. This is very complex and the developments of recent months have revived the possibility of more extreme scenarios. Most importantly, economic and financial problems in the region could be worked out in a costly and disorderly manner, for example with Greece leaving the monetary union. Despite its small size within the Eurozone, such an outcome could inflict severe damage on the rest of the world if there is contagion to bigger European economies. The macroeconomic and financial situation of Spain continues to spur doubts, as reflected in the steady increase in its risk premiums.

3  All speeches are available online at www.bankofengland.co.uk/news/speeches  3  Throughout our work on AI/ML we want to enable safe innovation. We are open to use of this technology, but with proper scrutiny to the practical details. This is how we balance the competing demands of our primary objectives, which include ensuring financial stability and ensuring safety and soundness of firms, and our secondary objectives such as promoting competition. Open to new firms entering  My second theme is the importance we at the Bank of England attach to being open to new firms entering markets. In addition to supporting new ideas and approaches, fintech is creating a more open, competitive and diverse financial ecosystem. At the Bank of England, we see more businesses working on identifying and solving global financial challenges as a welcome development. It is clear that on several dimensions today’s financial system offers an imperfect service, including the cost and efficiency of domestic and cross-border payments and access for the disadvantaged or excluded. We want to improve the service consumers and businesses receive, without compromising our regulatory perimeter or undermining the ‘same risk -same regulation’ principle that underpins our approach. At the heart of our vision for these improvements is putting consumers at the centre and empowering them to take full benefit from their data. I will discuss this in more detail at tomorrow’s panel session on SME financing.
Poverty still remains at significant levels; marked disparities in regional economic activity are clearly evident; unemployment, although declining, is still high, particularly among the youth; agricultural productivity is low, resulting in low farmer income and higher prices for consumers; despite some diversification of the economy, exports are concentrated in a few commodities and a few markets, thereby increasing the vulnerability of the economy; the fiscal deficit has remained high, resulting in inflationary pressures and increasing public debt; and essential economic infrastructure remains inadequate. These concerns have been aggravated by the tragic consequences of the tsunami that resulted in the loss of so many lives and extensive destruction of property. Today, the challenge is to consider how to achieve a balanced growth with economic and social stability. Let me now highlight some of the specifics on recent economic developments and policy challenges. Macroeconomic developments Sri Lanka was able to maintain an annual average economic growth of around 5 per cent in the post liberalization era. The country’s resilience to adverse shocks has improved with a significant diversification of economic activity, particularly in the export structure. This enabled Sri Lanka to achieve a growth of 5.4 per cent in 2004, in spite of several major shocks, such as the surge in international oil prices, a severe drought in the early part of the year and floods later in the year and finally, the tsunami disaster. Per capita income has increased to US dollars 1,030 in 2004.

In the euro area, the renewed intensification of financial market turbulence is leading to very high interest rates in some countries, to potentially damaging volatility, and to very low trading volumes in some government bond markets that at times cease to function appropriately. The tensions to some extent resemble those of May 2010, but in some respects they are more broad-based than what we saw at that time. It is clear that sovereign debt challenges in individual euro area countries – no matter their size – can undermine the stability of the euro area as a whole. In view of these developments, the authorities in the euro area have taken a multi-pronged approach to address the concerns about sovereign risk and its impact on the financial sector. Regarding fiscal support for crisis countries, euro area governments announced on 21 July a second support package for Greece and the introduction of additional flexibility for the European Financial Stability Facility and the future European Stability Mechanism. In this respect, the full and timely implementation of the 21 July agreement between heads of state or government is crucial. A renewed commitment by all euro area governments to the agreed fiscal targets is of course equally essential. The ECB has also stepped up its responses, reflecting its full commitment to ensuring a continuing smooth functioning of the key euro area market segments, a necessary prerequisite to achieve price stability in the euro area.
4  Yet it is clear that the unprecedented crisis caused by the pandemic has increased the credit, market and operational risks the banking sector faces.3 Precisely with the aim of mitigating and managing these risks, the European authorities have adopted various measures which, once more, have complemented those taken by the national fiscal and monetary policy authorities. First, supervisory processes have been adapted to release banks’ operational resources, gearing them to ensure business continuity. And, in turn, all those regulatory changes entailing increased requirements for banks have been postponed. In this connection, the BCBS has decided to delay the implementation of Basel III by a year. In any event, the BCBS has confirmed all jurisdictions’ commitment to full, consistent and timely transposition of Basel III under the new calendar. Second, aspects of the accounting regulations in force for the calculation of credit risk have been clarified, with the aim of preventing excessive procyclicality. As a counterpoint to this, it is necessary to prevent (particularly against the background of the prolongation of the crisis) a misuse of this flexibility from leading to inappropriate accounting practices that translate into a delay in the recognition of the effective impairment of certain credit exposures. Here, supervisory guidelines should be followed; these establish that the measures adopted in this area should not hamper the measurement of effective impairments and reasonable provisioning for credit risk, and they should afford banks the necessary incentives for maintaining adequate standards.

More importantly, the available evidence suggests that participating banks (both Spanish banks and those in the euro area as a whole) have used a significant portion of the funding received to continue to provide credit to the real economy.2  1  See the speech delivered by the Governor of the Banco de España “The role of the European Central Bank’s monetary policy in the COVID-19 crisis”, October 2020. 2 See, for example, the Bank Lending Survey (BLS) for October. For a summary of the results of the survey for the Spanish banks participating in the survey see Á. Menéndez Pujadas and M. Mulino (2020), «The October 2020 Bank Lending Survey in Spain», Analytical Articles, Economic Bulletin, 4/2020, Banco de España. 2  The second block of measures related to asset purchase programmes. Since late February, financial conditions had tightened in the euro area, with both corporate and sovereign risk spreads widening considerably. This spread widening in the euro area was uneven: countries that started from weaker fiscal positions, with higher debt levels, and those that were most affected by the first wave of the pandemic experienced a much more pronounced increase in their financing costs. This cross-country financial fragmentation was a challenge for the transmission of a single monetary policy throughout the euro area, and even posed a threat of a repeat of the 2012 sovereign debt crisis. In this context, in March the ECB announced the launch of the pandemic emergency purchase programme (PEPP).
With inflation expectations well-anchored to the target, companies have restricted the pass-through of changes in costs to prices. The necessary adjustment of real take-home pay has taken place more through fluctuations in money wages than prices. In short, the behaviour of the UK economy has improved over the past decade, both in terms of its performance and its stability, and that improvement has been more marked in the United Kingdom than in the rest of the G-7. Although structural reforms to the economy over several decades have made the economy better able to respond to economic shocks, the new monetary framework has also played a key role. Inflation expectations have been successfully anchored to the target. And that has meant that cost changes have affected wages and profits rather than prices. As a result, inflation and output growth have been remarkably stable. 2. The change in monetary policy decision making  It appears then that the success of the framework in anchoring inflation expectations has played a key role in the economic stability of the past decade. What was it about the framework that accounted for that? 4  BIS Review 43/2007  Since its inception, the MPC has met 120 times.7 At those meetings it raised Bank Rate 17 times, lowered it on 17 occasions, and left it unchanged 86 times.8 Bank Rate has varied between 3.5% and 7.5%. The MPC has changed interest rates at just over a quarter (28% in fact) of its monthly meetings.

Ignoring developments in money and credit would, however, be a mistake when there are shocks to the supply of money. What can generate such shocks to the supply of money? Modern models of monetary policy tend to be silent on this point. Economic theorists continue to struggle to develop microeconomic underpinnings of the roles of money, both as a medium of exchange and a store of value. This explains why money is often hidden. By construction, models often ignore the role played by banks that extend credit to borrowers and, in the process, create liabilities that serve as money. In those models nominal interest rates are set according to a “reaction function” that always returns inflation to the target. The implicit assumption is that the supply of money passively and instantly adjusts to that warranted by the demand for money. In reality, of course, our ignorance about the economy is such that we can never be sure that the level of Bank Rate at any point in time is consistent with bringing inflation back to the target over the medium term. And developments in the banking sector can lead to an expansion of the supply of broad money and credit even while Bank Rate remains constant. It is quite possible, in the real world, for there to be unwarranted money supply shocks – whether stimulus or restraint. The MPC must always be looking for warning signals of this.
Zeti Akhtar Aziz: Islamic finance - dynamic industry in a rapidly changing global environment Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the 2nd International Islamic Finance Conference, Dubai, UAE, 22 September 2003. *  *  *  Bismillahirrahmanirrahim “The Islamic financial industry is ascending to prominence in an environment that is highly competitive and constantly subject to the forces of change. The industry has made significant progress, with the essential fundamentals underpinning financial infrastructure to support its sound expansion in place. The challenge before us is to bring the industry to its next stage of development and reinforce the robustness of the industry in a more challenging environment. Of importance is the need to evolve the strategies that need to be adopted to build key strengths and enhance institutional capacity in the industry. Indeed, collaborative efforts need to be intensified on the global front and integration accelerated. As the decade unfolds, insha-Allah, the Islamic financial industry will evolve into an increasingly dynamic and vibrant industry” It is my honour and pleasure to be here today at this Second International Islamic Finance Conference, organised by the Islamic Development Bank and the General Council of Islamic Banks and Financial Institutions. Globalization and financial liberalization have brought profound changes to our domestic and international financial landscape. These changes have been accompanied by an accelerating pace of financial liberalisation, driven by advances in technology. The advancements in information and communication technology have removed barriers in the market place.

Our quest to create a dynamic Islamic financial system is to achieve the ultimate objective for Islamic finance that will contribute significantly toward the overall development of our economies, through the intermediation process to facilitate trade and investment. Moving forward, it is the ability of Islamic financial industry to build key strengths and enhance institutional capacity, intensify the collaborative efforts to strengthen the effectiveness of the Islamic financial infrastructure and the acceleration of its global integration that will provide the synergies and opportunities for the Islamic financial industry in the face of this more challenging environment. In doing so, Islamic finance can evolve into an important component of the international financial system that can contribute to enhance prospects for balanced global growth and shared prosperity. BIS Review 43/2003  3
Whether our community can find ways of distributing the costs of official sector support operations back to the system and its uninsured creditors rather than to the general taxpayer. If we can achieve that, market discipline would be enhanced. We need to hang on to “market discipline” as a watchword in these debates. The goal of re-regulation – of redrawing the rules of the game for the financial system – should not be to reintroduce the wisdom of the state into micro decisions about how to run businesses. But rather to put market discipline at the heart of a market economy. An effective  10  See the recent statement by Sheila C. Bair, Chairman, Federal Deposit Insurance Corporation, to the Financial Services Committee; US House of Representatives (29 October, 2009). 11  See Tucker P M W (2009b), “The repertoire of official sector interventions in the financial system: last resort lending, market-making, and capital”, Bank of Japan’s 2009 International Conference, Tokyo, May 2009 (pp. 18). BIS Review 144/2009  9  framework for crisis management drawing on the lessons of this crisis can take us in that direction. 10  BIS Review 144/2009

House prices have, as I mentioned in the introduction, increased by 140 per cent since 1996; annual changes are now in the vicinity of 8 per cent, down from around 13 per cent a year ago. As in many other countries, these developments have been the subject of much attention in the media, and calls have been made for the Riksbank “to do something about it”. Here some pedagogical challenges arise. We must explain that we do not target house prices but that we do not ignore risks associated with them. This is far from having a target for house prices. House prices vary in response to changing economic conditions, one of them being the stance of monetary policy. In Sweden, as in many other countries, house prices have increased in an environment characterized by strong macroeconomic conditions, rising disposable incomes and increasingly sophisticated financial markets. In this environment it is impossible to pin-point an appropriate rate of change in house prices. But policy makers always have to take decisions under a high degree of uncertainty. BIS Review 96/2007  5  Concluding remarks In conclusion, let me say that we have tried to be open and honest about the uncertainties surrounding the effects of house price developments on the rest of the economy and the appropriate monetary policy response. We have, in fact, been open about our own uncertainties and the differences in opinion, albeit small, that have arisen at times. This may have given rise to “confusion about the confusion”.