samchain/econo-pairs-v1 huggingface dataset:
First, the decline in these forward inflation compensation measures has been highly correlated with the fall in oil prices – a pattern that is hard to explain. Second, a careful analysis of the factors behind the decline in inflation compensation suggests that changes in liquidity risk premia and what investors are willing to pay for inflation protection account for most of the decline, rather than the decline reflecting a change in inflation expectations. Still, we need to continue to monitor inflation compensation closely, while recognizing that sorting out the allocation of the decline in inflation compensation across the three factors – liquidity risk premia, the price for inflation protection and inflation expectations – is admittedly difficult. And also, the conclusions reached in such models are sensitive to these models’ assumptions and structures. Regardless of how much signal one takes from these recent data, a decline in inflation expectations below levels consistent with our 2 percent inflation objective would be problematic because inflation expectations are an important influence on actual inflation. Businesses, for example, make decisions about the size of annual wage increases based, in part, on their expectations of future inflation. And, households base their spending decisions, in part, on how fast they expect their incomes to rise, and inflation expectations play a role in that process. Lower inflation expectations also raise the level of real interest rates, all else equal, which can undercut the power of monetary policy to support economic activity. This is particularly relevant at the zero lower bound for interest rates.

But as it progresses and we at the global level get closer to the limiting case of free and frictionless capital movements, then real risk adjusted asset returns increasingly become equalised across countries. As that happens, less and less of the transmission of monetary policy goes through what I call the interest rate channel. There would still be an interest rate channel at the global level, but that would be determined by the big countries. The small, open economies that have adopted a floating exchange rate could still achieve their inflation targets through the exchange rate channel. The scope for short run output stabilisation would be more limited, however. Is this necessarily a problem? If the exchange rate channel were relatively well behaved – i.e., if it provided smooth adjustment based on fundamentals and uncovered interest rate parity broadly held over relevant horizons – then the answer might be no. The problem is, however, that experience has shown that uncovered interest parity does not hold except perhaps over long horizons. Interest rate differentials give rise to widespread carry trading, which is by nature a bet against UIP. Exchange rates therefore diverge from fundamentals for protracted periods, followed by sharp corrections. So the exchange rate often seems to be as much a source of shocks and instability as a tool for adjustment and stabilisation.
One that has featured heavily in our market intelligence gathering is spillovers from international monetary policy actions. 17 In August of last year, financial markets began to anticipate that the European Central Bank (ECB) would embark on a programme of asset purchases, and it has subsequently announced that it intends to expand its balance sheet by € over the coming 18 months. Of course this action is not exogenous – it is itself a reflection of the headwinds facing the euro area economy. Between the ECB and the Bank of Japan (which is continuing its programme of Qualitative and Quantitative Easing announced in early 2013), central banks will purchase the equivalent of around $ worth of assets per month between now and September 2016 (Chart 10). You could say that the quantitative easing baton has been passed from the UK and US to the ECB and BoJ. That these large flows (or the anticipation of them) would have spillover effects on borrowing rates in the UK should not be a surprise. The ECB and the BoJ purchases will be equivalent in value to all of the net issuance by advanced economy governments over the next 18 months. And given that UK government bonds and other government bonds are (to varying degrees) substitutes, it is natural to expect their prices to co-move – in much the same way that if the ECB were to buy $ of Eurozone butter we might expect the price of British margarine to increase.

Minouche Shafik: Interpreting the yield curve – warning or opportunity? Speech by Ms Minouche Shafik, Deputy Governor for Markets and Banking of the Bank of England, at the Association of Corporate Treasurers Annual Conference, Manchester,  22 May 2015. *  *  *  Accompanying charts can be found at the end of the speech. The views in this speech are my own, and not those of the Bank of England or the Monetary PoIicy Committee. I would like to thank Ben Broadbent, Ronnie Driver, Kristin Forbes, Grellan McGrath, Martin Weale and Chris Young for their comments. It is a pleasure to be here. I would like to talk today about long term borrowing rates – a topic that I am sure is often on the mind of a corporate treasurer. I have been thinking about this issue since I joined the Monetary Policy Committee (MPC), as not only are long yields an important input to current financial conditions, but – carefully interpreted – they can offer an insight on future developments too. I have been waiting to find a group who might be as intrigued by it as I am, so I jumped at the chance to speak to the Association of Corporate Treasurers. The yield on nominal 20-year UK government debt peaked at around 17% in 1974. After that long term yields began a period of decline which continued right up to the mid 2000s (Chart 1).
First, by demanding clearer and more informative disclosures on the services you get from liquidity providers and platforms – including hold times, timestamps and reject codes. Second, by seeking out more effective, robust and independent analytical, aggregation and execution tools. And, third, by signing up to the FX Global Code – where buyside representation remains far too thin. Through these and other actions, it’s time for the buyside to recognise, and use, its influence in the FX market to the full. Because you collectively control trillions of dollars of assets – and when you have that sort of buying power, to quote a rather different Lola from Sarah Vaughan’s 1950s song, ‘whatever Lola wants, Lola gets’. 2  All speeches are available online at www.bankofengland.co.uk/news/speeches  2  The macro-behaviour of FX markets: a scorecard  Central banks like the Bank of England care a lot about FX markets. They determine the relative prices of our national currencies. They help transmit monetary policy, and hence also reflect market expectations. And they underpin international trade and asset markets, and hence economic and financial stability. To do all this well, we need FX markets to be efficient, resilient and fair. How do today’s markets score? An informationally efficient market is one in which prices reflect all relevant information, in a timely way. FX markets are typically thought to come as close as any to meeting that test.

ICT, Security, Operations, Credit Control, Anti-Money Laundering and Fraud Investigation departments need to break down the various silos to facilitate faster detection and prevention of cyber financial crimes. No single department or function can be an island in this battle. In the same vein, no bank or financial institution can be an island. One financial institution brought down by a cyber-attack would impact other banks and could ultimately destabilize the entire financial sector. It is for this reason that I call upon all CEOs  2|Page  here present to ensure that Cyber Security is entrenched in our day-to-day operations and strategic plans. Ladies and gentlemen, I am aware that other countries have set up Computer Incident Response Teams (CIRTs) for various industries, including the Financial Sector. It is high time that we seriously begin to consider setting up a financial sector CIRT in Zambia. I believe that the CIRT would, not only assist in ensuring that all financial institutions are collaborating and working as one in mitigating cyber risks, but also enable information sharing. I am therefore calling upon Bankers Association of Zambia to work with Bank of Zambia to ensure that this is achieved. Ladies and gentlemen, I wish you the best and I encourage you to participate actively during the presentations and discussions. Use every opportunity to tap into the vast experience of the resource persons and your peers during these few days. With these remarks, I declare this workshop officially open. Thank you and God bless you all. 3|Page
Of the 2.2 million increase in the UK’s population between 2014 and 2019, 20% was in London and 13% was in the South East. These areas have seen above average house price growth. But as well as these fundamental drivers, house prices also depend on expectations and on whether households are able to obtain and afford the credit that will allow them to get onto the housing ladder. There is substantial evidence, both theoretical and empirical that credit conditions – both the cost and the availability of credit – have played a leading role in driving house prices in the UK and the US. Empirical cross-country estimates vary, but would suggest that a 1% increase in the policy rate, which would translate into higher borrowing cost, all else equal, reduces house prices by around 2-11%, with the majority suggesting a drop between 6-9%.5 The more purchasers are constrained by either the price or the availability of credit, the larger the impacts of a change in credit conditions on house prices is likely to be.6 Credit constraints are most likely to affect first time buyers. Conversely, the greater the proportion of purchasers that are not dependent on credit, the weaker the impact of credit conditions on prices will be. Such ‘deep-pocketed’ investors can act as arbitragers, selling when house prices are high and rental returns therefore low and, conversely, buying when prices are low. There is some support7 for the existence of such an arbitrage mechanism in the UK8.

I will go on to look at why, post-pandemic, the market might be very different to the post-GFC period and some of the broader implications were house prices to resume their pre-GFC trend of rising significantly above earnings. Finally I will look, at what, if any, implications this might have for policy. 1  Countries included in this calculation are: Australia, Belgium, Canada, Switzerland, Germany, Denmark, Spain, Finland, France, United Kingdom, Ireland, Israel, Italy, Japan, South Korea, Luxembourg, Netherlands, Norway, New Zealand, Sweden, United States. The authors acknowledge use of the dataset described in Mack, A., and E. Martínez-García. 2011. "A Cross-Country Quarterly Database of Real House Prices: A Methodological Note." Globalization and Monetary Policy Institute Working Paper No. 99, Federal Reserve Bank of Dallas. 2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  The post financial crisis period. In the 30 years following the liberalisation of the financial sector in the 1980s, outside recessionary periods, house prices in the UK grew consistently faster than earnings. There were two periods of particularly fast growth in house prices relative to incomes. The first was in the late 1980s, ahead of the early 1990s bust, and was driven by that liberalisation. The second was from the late 1990s up until the global financial crisis, and may have been linked to the Bank of England’s independence in 1997 and the consequent reduction in interest rates as inflation expectations and risk premia fell.
Figure 7 plots the volatility of four price indices over time. The standard deviations here are calculated over a moving 36-month period 25. The figure shows that volatility has different levels during different periods. The prices of Swedish-produced fruit and vegetables varied more in 1995-2019 than between 2005 and 2019. The volatility of prices of coffee and cocoa has increased again after being quite low over a 15-year period. The price movements on books have become much more volatile in recent years. 26 The same applies to prices for foreign travel. 27 The changed volatility can often depend on changes in measuring methods. A new way of measuring prices of foreign air travel, for instance, has contributed to a new seasonal pattern with a higher volatility in recent years. Figure 7. Rolling standard deviation for different price indices  Annual percentage change 35  35  30  30  25  25  20  20  15  15  10  10  5  5  0  95  97  99  01  03  05  07  09  11  13  15  17  19  0  Fruits and vegetables, Swedish Coffee and cocoa Books Air travel Sources: Statistics Sweden and the Riksbank  25 The calculations are based on annual percentage changes. 26 The price measurement for books was changed in 2007.

For a long time the inflation target was expressed in terms of the Consumer Price Index (the CPI), but since 2017, it has been expressed in terms of the CPI with a fixed interest rate (the CPIF). In the CPIF the direct effects of changes in mortgage rate have been excluded. 1 2 The following description of the concept of inflation can be found on the Riksbank’s website: If prices of some individual goods or services rise, this is not inflation. Prices of individual goods and services can rise because, for instance, it is more difficult to get hold of them. For instance, the price of oil may rise as oil reserves diminish. Such price increases are usually called relative price increases and are thus not inflation. For inflation to exist there should be an increase in the general price level, that is, prices in general should rise. And if one is to call it inflation, the price increase should be lasting. If, for instance, the government raises VAT, this has a one-off effect on the general price level, but does not lead to prices continuing to rise. The CPI is calculated every month by Statistics Sweden (SCB) and is intended to measure the changes in an average Swedish household’s living expenses. The measure is an aggregate of prices of a number of different goods and services. The aggregate is based on how large the proportion of each product or service is in relation to an average household’s total consumption costs.
15 The Fed’s FR 2420 data on bank borrowing activity show that after each increase in the ON RRP offering rate, the distribution of fed funds trades shifted toward higher rates, with the vast majority of trades being executed at rates at or above the offering rate (Figure 3). The same patterns were observed in detailed data on brokered fed funds and Eurodollar trades, the latter of which encompasses a larger volume and wider set of lenders than fed funds, and also in secured markets. Examining in particular individual repo trades where money market funds and GSEs supply cash to counterparties over the tri-party platform, we saw repo rates shift higher and nearly all trading volume occur at or above the ON RRP rate. Thus, the rate on the ON RRP facility performed as a floor for nearly all overnight money market transactions, exactly as theory would predict for even small and temporary rate changes in the offering rate. After subsequently lowering the ON RRP offering rate back to its exercise baseline of 5 basis points in mid-December, secured rates declined. Interestingly however, average unsecured rates remained at somewhat elevated levels, even as a portion of the activity returned to lower rate levels (Figures 4 and 5). 16 The drivers of this dynamic remain unclear and illustrate the complexity of money markets, but may partly reflect some lenders in unsecured markets gaining information about their relative bargaining power as a result of the ON RRP tests.

Monetary policy can mitigate the effects of weak development abroad An even lower repo rate could help inflation to return to the target somewhat more quickly, as illustrated in a monetary policy scenario in the Monetary Policy Report published in July. According to the Riksbank’s model calculations, a further repo-rate cut would lead to a further increase in consumption and increased investment. A lower repo rate would also weaken the exchange rate, which could benefit exports while at the same time making imports more expensive. All in all, this would lead to higher GDP growth and a higher level of resource utilisation, which would lead to a higher rate of price increases. According to the calculations in the Monetary Policy Report, a 0.25 percentage point lower repo rate for one  4  BIS central bankers’ speeches  year would lead CPIF inflation to approach 2 per cent during the first half of 2015, which is approximately six months earlier than in the Riksbank’s main scenario.2 Thereafter, in this example, CPIF would be marginally above 2 per cent. Looking at these calculations it appears that a lower repo-rate path would be the better strategy for stabilising CPIF inflation and resource utilisation. However, this interpretation does not take into account the fact that there is uncertainty about the effects of monetary policy on the economy.
A number of avenues need to be explored. • First, if this exercise is necessary per se, its full potential will be delivered only if all lessons are properly drawn. Some guiding key principles, or “Fundamental elements”, to be designed in the wake of the G7 exercise, will help achieve this objective. • Second, we must leverage on this G7 exercise: the regular practice of coordinated crisis management exercises should be encouraged in order to enhance the resilience of the financial system. • Third, an enlargement beyond the remit of G7 countries should be considered with some other jurisdictions and/or with BIS involvement, and possibly beyond the sole financial sector actors. In future exercises, the current format will require cooperation arrangements on a wider scale. ** Regulation and supervision, information, and preparation: these are the areas where we clearly need to improve our coordination. I would like to conclude with a last imperative: action. We all share the principles, but there was today in this conference a sense of urgency, of concrete urgency. This is where the French presidency of the G7 intends to be useful: • First, by giving greater visibility and support to the CEG work, which is going to deliver important papers on cross-sector coordination and on the assessment of vulnerabilities.

G7 2019 Conference – Banque de France, 10 May 2019 Cybersecurity: Coordinating efforts to protect the financial sector in the global economy Conclusion by François Villeroy de Galhau Governor, Banque de France  Press contact: Mark Deen (mark.deen@banque-france.fr). Page 1 sur 6 Ladies and Gentlemen, First, I would like to thank the moderators and the panelists for their very rich comments and the very useful ideas. We are all convinced that cybersecurity of the financial sector will remain on our agenda for a long time. The challenge is no longer about gaining awareness anymore, but to find ways to intensify and rationalise our action. Based on the discussions today, let me start with one pre-requisite – coordination - and then propose concrete steps and tangible actions to improve our coordination in three areas: I. Regulation and supervision; II. Information; III. Preparation. A. Global threats, coordinated action Panel 1 questioned the importance of cyber threats for the financial sector. There is a consensus that the level of cyber threats has never been so high, but at the same time, we must acknowledge that the capacity to anticipate attacks needs to be reinforced. Following an attack, we need to address the potential contagion issues to the entire financial system or the entire economy. This is why coordination is a pre-requisite, not an easy one but a necessary one. While remaining realistic, there will not be a “world organization for cybersecurity” for obvious reasons, including trust. Hence, coordination should be cross-jurisdictional.
This assessment derives from studies conducted by the Eurosystem but also from the reports published by “ECB Watchers”, with whom, incidentally, the ECB has regular contact, notably in the context of annual conferences. Research carried out by these “ECB Watchers” show for example that on average, the Eurosystem’s monetary policy decisions were very well anticipated by financial markets, whatever their orientation, at least two weeks in advance, and fully factored in at least a week before. A comparison with the Fed, moreover, does not reveal significant differences between the two institutions with regard to the ability of markets to anticipate the monetary policy decisions of the two institutions. That points to the transparency of the single monetary policy. In particular, the fact that the ECB has chosen channels other than the publication of  BIS Review 113/2007  7  minutes of the meetings of the Governing Council has not prevented it from reaching a high level of predictability. As regards the frequency, since the inception of the euro in 1999, the Eurosystem has changed its policy rates 25 times (8 cuts, 17 hikes), which is on average close to the usual average frequency of interest rate changes 1 . However, compared to the Federal Reserve, in particular since 2001, the frequency of the changes is by far lower. Does this necessarily imply that the Eurosystem does not move enough or too low?

Working through local community groups to engage borrowers, or identifying with religious tenets to overcome weak willpower to repay, are some experiential learning that creates favorable conditions that can expand access to credit and encourage high repayment rates. These “small nudges”, a notion popularized by behavioral scientist David Halpern, allow us to revisualise how operating models and technology can be adapted more effectively and efficiently to deliver sustainable microfinance solutions. Malaysia’s microfinance journey has also reflected a wider focus on developing the broad range of financial services that are needed by the unfortunate to manage and improve their financial circumstances. Credit is important, but not all important. Savings, insurance, business training and financial education are other key components of our program approach which work together to amplify the economic and social impact of microfinance. The largest microfinance institutions in Malaysia are also among the largest mobilisers of micro savings. As a case in point, our National Savings Bank ranks among the top three financial institutions in the country with the largest number of micro-loan and savings accounts. Overall, 92% of the population have a deposit account, compared to 42% who have a loan account. We are also currently working to expand the offering and take-up of micro insurance solutions under a multi-pronged strategy that combines tailored products offered by insurance companies and development financial institutions, and a universal product option available through low-cost mobile and other channels.