samchain/econo-pairs-v1 huggingface dataset:
At the meeting in July, for example, all of the Board members agreed to increase the interest rate. But three of us felt that the forecast for the repo rate path in the period ahead should be some-what lower. This disunity attracted a lot of attention in the media and also provided some clues that made it easier to forecast what the vote would be at the latest meeting. Previously, before we began publishing interest rate forecasts, there were also different opinions among the Board members about how the interest rate should develop in the future. But as no forecast for the repo rate was published and there was nothing concrete to enter a reservation against, any differences of opinion were not visible to the outside world. It is probably also the case that the future development of the repo rate was not discussed as much internally then as it is today. BIS Review 113/2008  1  Disagreement a healthy sign Another thing that I feel is worth pointing out is that disagreement among the members of the Board should not be seen as a sign of weakness. This would perhaps be a reasonable interpretation if you held the view that the Board members should be so wise that we can simply "calculate" which decision is the only possible correct one and agree on it. Unfortunately, the world is far too complicated for this to be possible.

A robust and stable financial system, that we have managed to ensure so far, is a necessary, but not sufficient condition for achieving sustainable growth. Financial system efficiency needs to be upgraded, so that it serves to lift economic efficiency, not least by harnessing the hitherto untapped strength of the grass-root economies, where the emerging organic social-economic network has increasingly highlighted the potential contribution to growth and welfare improvement. For the banking system, the strategy to harness this potential is set out in the Financial Sector Master Plan Phase 2, which is a continuation from Phase 1. BIS Review 20/2010  1  Ladies and gentlemen, The challenges I have raised, together, pose a tall order. So in today’s talk, let me set out our strategy and policy priority in three parts. First, the SWOT analysis of the banking system and the challenges we face; Second, the key strategies in the Financial Sector Master Plan Phase 2; and Third, the key measures in risk-based supervision to ensure stability. First, the strength of our banking system is evident in its continuous solid performance. During the toughest times, our banks remained strong and resilient against the backdrop of economic slowdown. Loan decelerated, partly due to contraction in corporate portfolio and deceleration in household portfolio, as a result of more cautious business undertaking and household spending, and partly due to tightened loan underwriting standard. The good news is the figures are already starting to pick up again.
This is a task that is not confined only to the Central Bank, but is for all economic and financial policy makers. Beyond these risks, in the scenario we consider today to be the most likely, the Chilean economy will expand at a pace that is consistent with its trends. Inflation will gradually return to 3% as specific temporary factors that have influenced recent indicators dissipate. Let me describe this scenario and the risks identified in some detail. Macroeconomic scenario Since the last Monetary Policy Report, the Chilean economy has continued to show high strength and inflation has remained limited. Contractionary risks coming from abroad have eased, while expansionary risks originating domestically have gained importance. Domestic output and demand growth exceeded projections, with a greater boost from investment and more recently also from private consumption. Dynamic expenditure has resulted in a smaller trade surplus and a high degree of internal resource utilization. Headline and core inflation indicators have dropped to near 1% annually because of a number of temporary factors, and forecasts are that they will return to 3% within the projection horizon. Internationally, the threats associated with the situation in the Eurozone are still in full force, but other risks, relating to the U.S. and China, have moderated. In this scenario, the Board has held the Monetary Policy Rate (MPR) at 5%. As I mentioned at the beginning, Chile’s GDP grew 5.6% in 2012.

The copper price trend is forecast to slope downward, because of a larger response of supply than in previous years, but it is revised up in 2013, incorporating actual first-quarter figures. Thus, the baseline scenario assumes that the terms of trade will be slightly higher than foreseen last December (table 1). In the baseline scenario, GDP growth will be in the 4.5%–5.5% range in 2013, exceeding December projections. The revision is partly explained by stronger growth foreseen in the mining industry, as revealed by incoming indicators. It also considers that the external impulse the Chilean economy will be receiving from abroad will be somewhat stronger, in line with upward revisions to growth of our trading partners and terms of trade. Domestic demand growth, because of both its dynamism of the end of 2012 and partial indicators of early 2013, is also corrected upward, to 6.1% (5.7% in December). Annual growth in investment and consumption is up from earlier projections, bringing the current account deficit to 4.4% of GDP in 2013, compared with 4.6% forecast in December. In any case, the path of domestic demand and investment assumes variation rates declining in the coming quarters (table 2). Y-o-y inflation will remain low in the short term, still affected by the specific factors that have influenced recent indicators. As they dissipate, CPI inflation will start to rise, reaching 2% by mid-year.
The way forward Becoming a member of the euro area does not represent the end of a process, but rather the beginning of a new era in which the burden of adjustment will have to be carried entirely by the real economy and in which the harmful effects of inefficient institutions and practices on costs and final prices will become more visible. The policy challenge, therefore, is to maximize the benefits of participation in monetary union and so bridge the remaining income gap with the euro area. Malta’s per capita income level is still around 70% of the euro area average. Among other things, this means that further fiscal consolidation is necessary in order to achieve a balanced budget by the set date of 2010. There must also be more emphasis on expenditure-based adjustment, particularly in view of rising pressures caused by ageing-  BIS Review 14/2008  5  related factors such as pension and health care costs. It will be equally important, in both the private and public sectors, for wage growth to be compatible with productivity growth, labour market conditions and cost developments in competitor countries. The further strengthening of competition in both product and resource markets and the creation of more incentives to work are also necessary in order to raise the participation rate. These ambitious objectives clearly allow no room for complacency. In this regard, it is a positive sign that the Budget for 2008 promises policy continuity.

And three points on what it will mean. On the “how”, the first thing to say is that going forward, banks are being required to carry considerably more capital and liquidity. Second, as is now well known within the industry, the international authorities have agreed a blueprint for resolution regimes to manage the failure of so-called Systemically Important Financial Institutions in an orderly way. G20 Leaders have committed to legislate that regime into their domestic systems where necessary. All resolution regimes have the effect of distributing the losses of distressed financial firms – ie losses already or prospectively exceeding equity – across unsecured, uninsured creditors. That is the only place losses can go if taxpayers are to be spared. “Bailin” has focussed minds on this, but is in fact just one method, albeit a very important one, for ensuring that uninsured creditors take losses. Those “how” points are very familiar. A few comments, therefore, on possible implications – all of which, looking ahead, point towards the crucial importance of our capital markets. First, in a world of less leveraged banks, a business model of Originate and Warehouse – because that is what it became by the middle of the past decade – is unlikely to be viable. Maybe a genuine model of Originate and Distribute will emerge, with something like agencytype market making and trading. Second, holders of bank paper – especially bonds – will be living in a different world. They will have a big incentive to monitor the riskiness of banks.
According to the Ministry of Commerce, Chinese enterprises have already invested a total of $ billion in 49 countries along the “Belt and Road” in the first ten months of this year. The commencement of operations of the Asian Infrastructure Investment Bank is expected to bring about more Chinese capital and companies “going out” over time. Hong Kong’s deep and mature financial markets will be an ideal place for corporates to raise funds for infrastructure projects and manage investments for their ‘Belt and Road’ developments. The capital investment projects are also expected to create new opportunities for the use of RMB in trade and investment activities, giving rise to new opportunities for RMB settlement, financing and asset management in the region. To ride on these opportunities, Hong Kong has been actively pursuing measures to develop into a hub for corporate treasury centres (CTCs) as Chinese corporates and multinational companies expand their footprints and increasingly demand centralised treasury management. The HKMA has been working closely with the Government to develop a concessionary tax regime to provide a more market-friendly environment for these companies to set up their CTCs in Hong Kong, and the relevant amendment bill was introduced into the Legislative Council last week. The third trend is that market developments, both in terms of turnover and product range, have picked up momentum in the past year. There is a rapidly growing list of products provided by our banks in Hong Kong to meet their clients’ liquidity, hedging and other business needs in RMB.

And there will be more to come. We look forward to the launch of the Shenzhen-Hong Kong Stock Connect, and looking further ahead, the Mainland authorities have announced plans to consider implementing the Qualified Domestic Individual Investors scheme (QDII2) on a trial basis. It’s certainly true that individuals on the Mainland have shown a great deal of interest in diversifying their investment holdings. This is an area where we see Hong Kong having a strong competitive advantage, with our strategic location, our expertise in private banking and wealth management business, coupled with our strong client networks on the Mainland. To  BIS central bankers’ speeches  1  capitalise on these emerging opportunities, we have been liaising closely with the Mainland authorities on QDII2.The second trend is that not only is Chinese capital “going out”, Chinese companies are also increasingly "going out". Outward direct investments (ODI) by China to the rest of the world amounted to RMB758.5 billion in 2014, a 63% rise over the past five years. And, it’s interesting to note that 16% of these flows are settled in RMB, up from a mere 3.7% in 2011. This “going out” trend has been continuing for some time, but has been given fresh impetus by the greater desire of Chinese enterprises to diversify into other non-RMB asset classes. New policy measures by the Mainland authorities, notably the ‘Belt and Road’ initiative, has also played a key role.
6  BIS Review 158/2010  objectives, there would appear – all else being equal – to be a case for further action”. Since then, the Federal Open Market Committee (FOMC) has announced that interest rates will remain low and announced a new programme for buying government bonds (called Quantitative Easing, QE2). As we saw in Figure 3, GDP in the United States fell less than that in Sweden during the crisis. As I noted earlier, potential GDP in the United States may well have fallen more than that in Sweden. A correct GDP gap could then very easily be more negative in Sweden than in the United States. The repo rate is not a target variable that needs to be “normalised” Another argument in favour of raising the repo rate has been that it needs to be “normalised”. According to this argument, it would be better – all else being equal – to have a repo rate closer to a normal level. As the repo rate is now so abnormally low, a “crisis rate”, it should be raised or at least not cut, even if this means we are further from the inflation target and resource utilisation is even lower than normal. I do not agree with the normalisation argument. In my opinion, the repo rate and the repo rate path have no value in themselves – they are not target variables. A “normal repo rate” is not a target for monetary policy.

The mean squared gap for the unemployment forecast is defined as T  (ut,t u*)2 /(T 1), where ut+,t signifies the forecast for unemployment and u* signifies equilibrium 0  unemployment rate. BIS Review 158/2010  5  better stabilisation of the variable in question (see Svensson 2010a, b for further discussion). The mean squared gap shows that the lower repo rate path entails better-balanced monetary policy, as both inflation and unemployment are stabilised better. 5 The fact that a majority of the Executive Board chooses to raise the repo rate despite the forecast for inflation undershooting the target and the forecast for unemployment being high, indicates that monetary policy is addressing something other than inflation and resource utilisation. The fact that high GDP growth is used as an argument in favour of raising the repo rate could be interpreted to mean that monetary policy in practice aims to slow down growth. Figure 3 shows GDP developments in Sweden, the eurozone, the United Kingdom and the United States. Compared with the other economies, GDP fell most in Sweden – a total of almost 8 per cent. It has now recovered to a level that is about the same as the eurozone, higher than in the United Kingdom but far below that in the United States. One could claim that the other economies have substantial structural problems, including problems in the financial sector.
In South Korea and Malaysia, capacity utilisation has returned to pre-crisis levels in many industries. Countries across the region have revised their growth forecasts upwards. For example, South Korea is expecting strong growth this year – 8%, while Singapore has forecast growth between 4 and 5%. Even 1  BIS Review 117/1999  Indonesia’s economy is stabilising, and its prospects have brightened now that Presidential elections have turned out well. This recovery has given the Asian economies breathing space to address structural weaknesses. But the problems have not vanished. Countries must still press on, to deal progressively with hard issues of corporate and financial restructuring, and lay the basis for long-term growth. Otherwise their recoveries will remain incomplete and vulnerable. The sustainability of each country’s recovery will therefore depend on how it tackles its own problems. Countries differ significantly in the problems they face, and their strategies for overcoming these problems. Some will recover faster than others. South East Asia In South East Asia, the situation has stabilised. The mood has totally changed over the last 12 months. Thailand has made some progress in cleaning up and consolidating its financial sector.1 NPLs peaked in May 1999 and are expected to decline steadily by next year, provided debt restructuring and recapitalization progresses. But significant problems remain, and analysts and rating agencies remain concerned about the state of the banking sector in Thailand. Malaysia’s economy has also stabilised, with strong balance-of-payments surpluses and growing foreign reserves.

Another variant of an asymmetrical disturbance is that asset prices – the property market and stock exchange – due to a too strong economic development are forced up for a short while. However, in situations such as this, the required tightening can usually be managed with the help of fiscal policy. Naturally, stabilisation policy via the budget has its limitations since it only works with delay and is dependent on many other long-term considerations. In addition, the Stability and Growth Pact, which Sweden is included in whether or not a member of the EMU, provides a limitation on increased government expenses. The most important “shock absorber” even if we do not join the EMU, but especially if we do, is that wages can adapt to changes in the competition situation, i.e. that there is a high degree of flexibility and pliability in wage formation. It would thus be possible to avoid an increase in unemployment during an adaptation period. Naturally, it can be more difficult, politically, to achieve this than to adapt an exchange rate. A single monetary policy therefore requires greater discipline from labour market parties since the connection between wage costs/inflation and monetary policy will be less obvious than is the case today. The krona The reasoning I have pursued so far has assumed that the exchange rate actually functions as a shock absorber: that the floating exchange rate adapts to competitiveness and the business climate, i.e.
Copper prices at the London Metal Exchange (LME) fell from highs of $ per tonne in July 2008 to as low as US $ per tonne in December 2008. The dramatic decline in the price of copper led to reduced earnings from copper exports by mining companies and subsequently reduced earnings for the Government from mineral royalties and corporate taxes from this source as well as falling income taxes from employees in the mining and related sectors. The reduced export earnings for the mining sector also translated into lower investments and production. Further, some mining companies, which were carrying out exploration works, discontinued these activities. Ultimately, all this led to job losses in the country’s extractive industry, leading to lower income tax revenue. In addition, the downturn caused a reduction in the Government’s capacity to develop the much needed infrastructure as it had to scaledown its capital expenditure in line with lower revenue. Loss of employment In the real sector of the economy, the impact of the crisis was reflected in the scaling down of production or the closing down of some mining operations due to low copper prices. This had the inevitable consequence of loss of jobs. However, the reopening of some closed mines which has followed the recovery in metal prices has since led to a slight improvement in the situation. External position weakened The declining earnings from copper exports adversely affected Zambia’s balance of payments position.

The federal guarantees for the COVID-19 loans and the liquidity provided at favourable conditions by the SNB have contributed towards Switzerland being able to avoid a credit crunch in the past few months. Page 3/4  Zurich, 17 December 2020 Thomas Jordan  News conference  It will take some time yet before the economy recovers, and uncertainty will remain high for the time being. We will therefore be seeking to do our utmost with our monetary policy to ensure price stability and to contribute to the economic recovery. Climate change and the SNB  I would now like to talk about the significance of climate change for the SNB. We have been working intensively on this topic for some time now. We want to properly assess possible consequences of climate change for the economy, for financial stability, and for the management of our foreign exchange reserves in order to ensure that we can fulfil our statutory mandate at all times. To this end, we also collaborate with other central banks, in particular in the Network for Greening the Financial System (NGFS), and we work together closely with FINMA. As regards monetary policy, we are continuously deepening our analysis into how climate change could affect economic growth and inflation. The dialogue with other central banks is particularly important in this area. When it comes to financial stability, the SNB focuses its efforts on determining the impact of climate risks on the stability of the Swiss banking system.
It could set in motion a complex of effects on aggregate supply and demand, on inflation, equity prices and interest rates. Just to give a few examples, let me briefly mention the following effects: First, a positive productivity shock raises the economy’s potential growth rate. It also affects aggregate demand through new, profitable investment opportunities, higher equity prices and expectations among households of higher permanent income. One question for policymakers is whether the demand effects are so powerful that they have the potential to outpace the growth of aggregate supply in the short and medium perspective. Second, there could be temporary disinflation effects at work if the increase in productivity is unexpected initially. If wages are slow to adjust, higher productivity growth lowers unit labour costs and thereby reduces price inflation. Here again there are important questions for policymakers. Should this effect be allowed to result in a temporary reduction of price inflation or unemployment? Third, an increase in the trend rate of productivity growth could also result in a higher equilibrium real interest rate, when the output gap is closed, in order to balance saving and investment. Fiscal policy and the development of public financial balances could at least partly offset this effect, as could the economy’s degree of openness. All this implies that monetary policymakers, also in Europe, could face quite a few challenges. One of them is to identify structural changes and distinguish these from cyclical variations. Another challenge is to detect the magnitude of the effects.

It is not without some pride that I recall that, in a sense, Sweden was actually something of a pioneer in explicitly focusing monetary policy, with a flexible exchange rate, on a specified target for prices. Back in 1931, after Sweden had been obliged to abandon the gold standard, its government and the central bank declared that the overriding objective of monetary policy would be the stabilisation of prices. More specifically, the finance minister of the day described the task of the central bank as that of, “using all means available, preserving the domestic purchasing power of the Swedish krona”. In this way, the Riksbank became the first central bank to declare price stabilisation as its policy norm with a floating exchange rate. The norm was based on a proposal made much earlier, in 1898, by Knut Wicksell, often regarded as Sweden’s greatest economist at the time. Wicksell’s rule for monetary policy, which stemmed from his extension of the classical quantity theory of money, was simple: “The central bank is to raise the discount rate as long as prices are rising, lower it as long as prices are falling and keep it constant when prices are stable”. In other words, price stability was to be achieved through interest policy. Although the rule applied to the price level rather than to inflation and was not forward looking, it is a clear parallel to the rules of thumb that are used today by those central banks that target inflation.