samchain/econo-pairs-v1 huggingface dataset:
Consistent with that, a further 25bp hike – smaller than the 50bp increases seen at previous meetings – was announced in March. Given the lags in monetary policy transmission, there is a lot of policy-in-the-pipeline still to come through. Nevertheless, on balance the onus remains on ensuring enough monetary tightening is delivered to ‘see the job through’ and sustainably return inflation to target. Although headline inflation is set to fall significantly in the course of this year owing to a combination of base effects and falls in energy prices, caution is still needed in assessing inflation prospects on account of the potential persistence of domestically generated inflation. I hope my remarks today have given some insight into how I am thinking – and will think – about the role inflation persistence will play in coming to monetary policy choices: focusing on intrinsic persistence through the lens of an interpretation of the incoming data using a structural story about  Page 12  price and wage setting behaviour. Of course, the evolution of inflation persistence against the background of the terms of trade shock stemming from Russia’s invasion of Ukraine is only one of many challenges facing monetary policy makers at present. It needs to be seen in the context of other economic disturbances, not least the recent turmoil in the financial sector. We have been told by our colleagues in the Financial Policy Committee that the UK financial system remains robust and resilient.

After the crisis occurs, the policy has to be conducted according to the separation principle that allows a central bank to separate the decision on the appropriate monetary policy stance and the decision on the support of the financial system. We clearly demonstrated this in April when we decided to leave the non-standard measures unchanged, but at the same time decided to increase our key policy interest rates. In the future we will continue to live up to our mandate. We will do whatever is necessary to deliver price stability in the medium term,  6  BIS central bankers’ speeches  using our policy interest rates, and continue to contribute to the stability of the financial system, using our non-standard measures. Conclusions To sum up, significant progress is being made in Europe to produce a more comprehensive and encompassing concept of economic governance. Looking forward, I believe however that it is crucial that the euro area dimension of economic governance is further reinforced in order to be commensurate with the wide range of sources and channels of financial instability, which has been made evident by the financial crisis. This reinforcement should involve two main institutional moves:   Closing the gap between the economic and financial aspects of euro area governance by fully integrating financial supervision within the concept of economic governance; and, consequently    Significantly strengthening the arrangements for financial supervision within the euro area, which could be supported by the establishment of a pan-euro area resolution fund.
On the then profile of market interest rates, the Committee as a whole 1 judged that, most likely, output growth would slow quite sharply during the current year and would be anaemic for a period thereafter. Crucially, the balance of risks to that most likely (or modal) outlook was judged to be on the downside. In other words, the mean forecast for output was somewhat weaker still. For inflation, meanwhile, the most likely outlook was that, after an uncomfortably high and protracted spike, it would fall back to a little below the 2% target by the end of two years, and would continue to drift down thereafter. In other words, the crucial judgment was that the accumulation and persistence of slack in the economy would most likely be enough to avoid inflation getting out of control. That was the part of the August projections that captured the attention of the markets and commentators. But, collectively, we also concluded that the balance of risks to the inflation outlook was to the upside, so that the mean for inflation was actually above the 2% target at around two years or so. That’s not without significance given that most analytical models suggest that policymakers should set policy in the light of the mean, not the mode – although a better description of the MPC’s approach would be to say that we take account of the nature of the entire distribution of risks.

Arrangements like these, with trusted protocols and agreed measures, will build confidence in managing the risks of importation of the Covid-19 virus, and allow countries to re-open to trade and travel. Strengthening Digital Connectivity The second area countries must co-operate on is relatively new but is growing rapidly in importance – digital connectivity. We all know how the Covid-19 pandemic has accelerated the use of digital services. Amid safe distancing measures and movement controls, many firms have shifted to digital channels to conduct business. 2/4  BIS central bankers' speeches  E-commerce, online education, tele-medicine, remote working, internet banking – have all taken off spectacularly. The ability to conduct business on digital platforms, especially across borders, has become a competitive advantage – for it allows people and businesses to tap onto a global market for sales or supplies or solutions. We need to deepen digital connectivity across countries, to expand opportunities for our people and businesses. An area that could clearly benefit from digital and data connectivity is cross-border trade. There is a large number and variety of parties involved in an international trade transaction. The trade process is highly fragmented, paper-based, slow, and cumbersome. Harmonising and digitising trade documents and putting them through a seamless digital platform will help to make trade more efficient and secure. Food safety will be an area of high priority as we emerge from the Covid-19 pandemic. This often requires traceability in supply chains that span multiple countries. Being able to do this well requires data sharing and digital connectivity.
Some of the factors holding down inflation – such as the cut in Medicare reimbursement rates last April – were one-offs and are now dropping out of the year-over-year figures. In some other areas, such as owners’ equivalent rent, price pressures look likely to firm somewhat. That said, I see little prospect of inflation climbing sharply over the next year or two. There still are considerable margins of excess capacity available in the economy – especially in the labor market – that should moderate price pressures. Most notably, the trend of labor compensation is running at only about a 2 percent annualized pace. This is far below the roughly 3½ percent pace that would be consistent with trend productivity growth of 1 to 1½ percent and the FOMC’s 2 percent inflation objective. Recently, some economists have argued that the amount of slack in the labor market may be smaller than suggested by the official unemployment rate of 6.3 percent. They focus on the level of short-term unemployment – those workers unemployed for less than 27 weeks – which has returned close to its average long-term level – and argue that it is the short-term unemployed that are critical in driving compensation trends. My own reading of this research suggests that one should not jump to such a conclusion. Instead, I conclude: •  The relative impact of each type of unemployment on wages depends on whether long-term unemployment reflects primarily structural or cyclical forces.

Our levers are the hard and soft infrastructure we control:   Hard infrastructure, such as the Real-Time Gross Settlement (RTGS) system, which lies at the heart of the UK payment system.   And soft infrastructure, such as our rules, regulations and standards. To illustrate what this means in practice, consider three examples of how the new Bank can provide a platform for private innovation to serve the digital economy, to finance major transitions, and to increase the resilience of the financial system. Serving the Digital Economy First, at the heart of the new economy, the very nature of commerce is changing. Last year, one fifth of all sales in the UK were online. Next year, it will be one quarter. The new economy is more inclusive, offering easier routes to market for firms both large and small, and greater access for consumers both near and far. We are entering an age when anyone can produce anything, anywhere and sell everywhere through platforms such as Tmall, Amazon, Shopify and YouTube. This new digital economy is placing new demands on finance. Consumers and businesses increasingly expect transactions to be settled in real time, checkout to become an historical anomaly, and payments across borders to be indistinguishable from those across the street. In parallel, big data is opening up new opportunities for more competitive, platform-based finance of SMEs. Search and social media data are supplementing traditional metrics to unlock finance for smaller enterprises whose assets are increasingly intangible.
Therefore, in order to make sure that central bank independence is understood, internalized and safeguarded by the public, it is necessary for them to fully comprehend the rationale of independence, understand why it is important and become convinced that central bank independence does not imply independence from society. For this reason, I firmly believe that it is vital to talk about independence frequently. 20  BIS Review 36/2005  As I have reiterated before, it is a globally accepted phenomenon that achieving price stability is the prerequisite of establishing a sound market economy and attaining sustainable growth and employment rates in the long run. Another globally accepted phenomenon is that price stability can only be achieved by employing lasting, sound and stable policies. For this reason, the public provides central banks with freedom from political authorities in order to enable them to implement the necessary long-term targets to control inflation and attain price stability, to achieve full employment and to sustain growth. This structure gives central banks the opportunity to reject the implementation of policies that pose risks to attaining price stability and creates an environment in which they can give warnings when required. These are the reasons why central bank independence is essential. Monetary policy implemented by a central bank that is able to effectively exercise its independence, is accepted by all sections of the public and the political authority.

It is very difficult to increase the income level and change the saving tendency in the short term. For this reason, the domestic savings deficit should preferably be met by direct foreign capital investments. Graph 10: The Shares of Public and Private Investments in GNP  30 Public  25  Private  (%)  20 15 10 5  2004  2003  2002  2001  2000  1999  1998  1997  1996  1995  1994  1993  1992  1991  1990  1989  1988  1987  0  Source: SIS. Due to the current economic program and the structural reforms in the scope of the program, a transition from a public sector-supported capital accumulation model to a private sector-supported accumulation model occurs, where market conditions are taken as indicators and criteria. The share of the private sector in the national income increases, whereas the share of the public sector declines. It is clear that the private sector-oriented growth plays a major role in achieving sustainable growth by boosting both exports and total industrial production. However, it should be noted that the private sector could not meet the expectations because it could not exploit sufficient resources. This was due to the dominance of the public sector borrowing requirement in the finance sector. Furthermore, the factors that slow down the capital accumulation process include the incomplete tax reform and the  12  BIS Review 36/2005  poor relationship between banking sector and real sector.
2 The pattern of bad behavior did not end with the financial crisis, but continued despite the considerable public sector intervention that was necessary to stabilize the financial system. As a consequence, the financial industry has largely lost the public trust. To illustrate, a 2012 Harris poll found that 42 percent of people responded either “somewhat” or “a lot” to the statement that Wall Street “harms the country”; furthermore, 68 percent disagreed with the statement: “In general, people on Wall Street are as honest and moral as other people.” I reject the narrative that the current state of affairs is simply the result of the actions of isolated rogue traders or a few bad actors within these firms. As James O’Toole and Warren Bennis observed in their Harvard Business Review article about corporate culture: “Ethical problems in organizations originate not with ‘a few bad apples’ but with the ‘barrel makers’.” 3 That is, the problems originate from the culture of the firms, and this culture is largely shaped by the firms’ leadership. This means that the solution needs to originate from within the firms, from their leaders. What do I mean by the culture within a firm? Culture relates to the implicit norms that guide behavior in the absence of regulations or compliance rules – and sometimes despite those explicit restraints. Culture exists within every firm whether it is recognized or ignored, whether it is nurtured or neglected, and whether it is embraced or disavowed. Culture reflects the prevailing attitudes and behaviors within a firm.

This would facilitate more active trading of SGS and $ bonds and deepen bond market liquidity. Repo transactions with non-residents are presently subject to a $ million consultation limit. Banks have told us that this requirement to consult is a psychological hurdle, even though MAS has assured them that the decisions will be liberal and quick. A non-resident borrowing $ through a repo must first obtain the equivalent amount in SGS, which is a $ asset. Given that MAS Notice 757 already limits a non-resident to no more than $ million of Singapore dollar credit for such investments, allowing banks to transact $ repos freely with non-residents will not lead to a significant net increase in $ credit facilities to non-residents. MAS has therefore decided to lift the $ million consultation limit. Banks in Singapore may now, without prior consultation with MAS, enter into repo transactions in Singapore government securities  BIS Review 130/1999  3  and $ denominated bonds listed on SES with any party, and for any amount, on condition that there is full delivery of collateral. OTC interest rate derivatives OTC interest rate products would open more avenues for non-resident investors to manage their $ interest rate risks arising from investing in the $ debt market. But hitherto MAS has restricted OTC interest rate derivatives, because they could facilitate speculative volatility in the $ In September this year, SIMEX introduced the $ three-month interest rate futures contract.
Why not persevere with the minimum exchange rate, instead of exposing the Swiss economy to the downsides of negative interest rates and the challenge of a stronger currency? With this question in mind, let me turn straight to a second fiction regarding Swiss monetary policy, namely, that an unlimited lengthening of the SNB balance sheet would be riskless. This fiction flies against common sense and is mostly prevalent in academic circles. I will try and clarify some misunderstandings with respect to central bank balance sheets by stressing three important facts that apply both generally and to the current Swiss monetary policy situation in particular. First, a central bank balance sheet is never a target per se, but rather, its size and composition simply mirror monetary policy decisions. Second, massive balance sheet expansions carry financial and economic risks. 3 This is clearly the case when the policies underlying the balance sheet expansion comprise outright purchases of foreign exchange. This puts foreign exchange risk on the central bank’s balance sheet. Third, policy measures involving a significant balance sheet expansion should be taken only as long as the benefits in terms of the broader policy objective clearly justify the risks and cover the costs associated with the balance sheet expansion. It is important to note that the costs and benefits of a given policy measure may change over time, and must therefore be reassessed repeatedly.

In addition, global interest rates have fallen to near zero levels, virtually eliminating any interest rate differential, and thus further reducing the incentives for Swiss investors to re-export their excess savings abroad. Together, these developments largely explain the observed net inflows of private capital to Switzerland since the crisis, and, despite them being compensated by public sector capital exports through foreign exchange interventions by the SNB, the persistent strength of the Swiss franc. These developments also highlight a first key fact of Swiss monetary policy: At any point in time, the attractiveness of the Swiss franc for both domestic and foreign investors is predominantly determined by the size of the interest rate differential and the safe haven status, with the latter being particularly important in times of heightened uncertainty. In the current global environment of low interest rates, imposing negative rates is therefore a monetary policy necessity in order to re-establish a material interest rate differential vis-à-vis the major economies. The negative rate thus contributes to restoring the relative attractiveness of foreign currency investments for Swiss investors and corporates. At the same time, it reduces the incentive for foreign investors to invest in Swiss franc-denominated assets. Over time, this fundamental mechanism will contribute to reducing the current overvaluation of the Swiss franc. The SNB is fully aware that, despite its established necessity, a negative interest rate policy does not come without detrimental side effects, notably for financial stability and the efficient use of capital, to name just two areas of concern.
As an example, I would like to mention the work carried out by the ACPR with representatives of digital asset service providers (DASPs) on theapplication of  anti-money laundering and counter-terrorism financing (AML/CFT) rules to the cryptoasset sector. As you have understood from these examples, at the Banque de France and the ACPRwe cannot envisage taking action without interacting with the innovative financial ecosystem that you largely represent. 3. This brings me to my last point: what are the challenges that we must not miss collectively? I would particularly like to emphasize here the issues related to the regulatory framework for the transformation of the financial system. The digital finance strategy published by the European Commission is already a year old and the roadmap includes many useful and structuring projects for the future. Already, the discussions on the MICA (crypto-assets) and DORA (operational resilience) projects illustrate the need to reconcile professionals’ knowledge and operational realities  with the general risk control objectives in order to achieve the balance between innovation and financial stability that I mentioned earlier. From my point of view as a supervisor, progress still needs to be made on these texts to reconcile the necessary pragmatism and the necessary flexibility that the search for this balance implies with the requirement for risk control and the prevention of regulatory arbitrage. However, the projects that will be launched in the future are no less crucial.

Strengthening of the current account position is continuous, with gradual closing of the deficits. Some countries even exhibit surplus, such as the case of Slovenia, Czech Republic, Croatia, Bulgaria and Hungary. Chart 5 Current account  Source: IMF, BOP database  6  The averaged numbers exclude data for Montenegro and Serbia due to the shorter time span of their BOP series. 8  Current account adjustment  Source: IMF, BOP database  Observing the adjustment, through structural lenses, one can notice that the adjustments in the current account, was predominantly driven by the balance of goods and services. The deficit in the balance of goods narrowed from an average of 15.6% of GDP in the 2000-2008 period to 10.6% of GDP, and in the following 2009-2013 sub-period to even lower share of GDP in the last four years of 8.2% of GDP. Additionally, the surpluses in the services shows steady increase, a dynamic that is more visible in economies with more developed tourism sector. While the initial adjustment in the acute phase of the crisis was through compression of imports, what followed afterwards was remarkable shift in export, which kept the trade deficit markedly bellow the pre – crisis level. Hence, in 2018 the average trade balance hovered around 8% of GDP, compared to 17% of GDP before the crisis. Imports is close to its pre-crisis level, while the level of exports surpasses it by close to 10 p.p. of GDP.
18.09.2019  Monetary policy and bank profitability in an environment of uncertainty 10th Conference on the Spanish Banking Sector, organised by the IVIE and the University of Valencia Pablo Hernández de Cos Governor  Ladies and gentlemen, good morning. I should like to thank the Valencian Economic Research Institute for the invitation to speak at this conference on the Spanish banking sector, which this year marks its tenth anniversary. I am honoured and delighted to participate in this event and share some reflections with you regarding the current profitability of Spanish banks and the main challenges that will shape their future. As you know, this is a subject that is attracting a lot of attention in Europe, both on the part of analysts and supervisors and the industry itself, owing to the concern about banks’ low profitability. Before I address this issue, allow me to start by describing the economic situation in the euro area and, in particular, the decisions taken by the Governing Council of the European Central Bank (ECB) last week. This is very relevant for the financial system, insofar as it is the context in which its activity will be carried out over the next few years. 1. The economic situation in the euro area and the monetary policy response  The international economic context has undoubtedly become more unfavourable over the past year, with a slowdown in growth and, in particular, in trade.

In addition to having an impact on profitability through higher legal costs, this situation has been accompanied by a reputational deterioration which, if not reversed, may lead to a loss of business in the medium term. This is particularly significant in a setting such as the present one with the emergence of new competitors described above. Consequently, it is essential for the sector to recover customers’ trust as soon as possible, this being a key asset in the financial business. Also, Spanish banks have to complete their adaptation to the new international regulatory and supervisory framework. As indicated, although their capital ratios are above the minimum requirements in the area of solvency, the Spanish banking system still remains below other European countries in the case of the highest quality ratio (CET1). Strengthening capital would not only lead to greater resilience to adverse shocks but it would also bring down issuance costs.5 In addition, higher solvency would help facilitate compliance with MREL requirements (Minimum Requirement for own Funds and Eligible Liabilities) that Spanish banks will have to gradually meet over the coming years. It will be a considerable challenge for smaller banks to comply with these requirements since they do not usually obtain funding by regularly tapping the capital markets. Lastly, another significant challenge is that associated with climate change and the transition towards a more sustainable economy which, although it affects all economic agents, has a particular impact on the financial sector.