samchain/econo-pairs-v1 huggingface dataset:
The consequences for Swedish monetary policy right now What do the rising commodity prices mean for the interest rate decision we made a couple of weeks ago? What will it entail for future monetary policy if these price rises continue? Well, it is of course largely the balancing act I recently described. We Executive Board members must currently take into account in our deliberations the forces pulling the economy in  4  BIS Review 57/2008  different directions. In Sweden economic activity is still fairly strong, but there are signs of a slowdown. We are also seeing weaker international developments and financial turmoil. In contrast, inflation and inflation expectations remain high. One can thus say that commodity prices are in a way in both scales of the balance. They are to some extent both behind the slowdown in economic activity and behind the high inflation and inflation expectations. The way my Executive Board colleagues and I weighed together the various factors at the most recent monetary policy meeting resulted in our holding the repo rate unchanged at 4.25 per cent. We are also currently assuming that the interest rate will need to be held at this level in 2008 to manage the inflation target a couple of years ahead. Of course, commodity prices were important in our assessments. So let me therefore conclude by describing how I myself reasoned in connection with the interest rate decision.

Given the monetary policy system we currently have in Sweden, it involves trying to find a path for the policy rate that ensures inflation is reasonably close to the target while the real economy is in balance. This is how one should reason regardless of what shocks affect the economy. In this sense an upswing in commodity prices is nothing special. …but their practical implementation is difficult However, the practical implementation of the principles is far from simple. This is partly because it is no simple task to capture in the forecast all of the effects that rising commodity prices might have on the economy. It is also because monetary policy works with a lag. Rapid price impulses cannot be immediately counteracted. A further complication is that the effects on inflation and the real economy move in different directions. Inflation rises while the real economy, for instance, production and employment, slows down. It is not self-evident how these effects should be weighed against one another, but this is something that must be achieved in monetary policy. The commodity price rises in recent years have caused inflation to rise in many countries. At the same time, growth in production and employment is slowing down. The slowdown is partly due to weaker international economic activity in the wake of the financial market turmoil and the downswing in the United States. But it is probably also partly due to the upturn in commodity prices.
On the one hand, it allows the economy a sufficiently long time span to accommodate significant changes in prices and monetary policy without entailing excessive costs in terms of lost activity or employment. The current environment is a good example of this. In the face of a shock such as the one we are dealing with, a shorter-term target would force a much more significant rise in the rate, thus increasing sharply the costs to the economy. On the other hand, a 24-month time horizon is a sufficient time limit for households and firms to avoid being affected by the uncertainty that could result from being unable to correctly anticipate how inflation will unfold. At a time when our economy is going through complex circumstances, reducing the spaces of uncertainty is greatly appreciated. Certainly, some of these spaces are beyond our ability to act, such as the war in Ukraine or monetary tightening in the world. But there are others where we do have the power to act. On our side, by assuring all those who live in Chile that the Central Bank will continue to do everything necessary to bring inflation down and return it to the defined target within the appropriate time frame. Maintaining and fulfilling this commitment is vital to help mitigate the costs that high inflation has on Chilean families.

Denny H Kalyalya: Expansion of Zambia’s banking sector Remarks by Dr Denny H Kalyalya, Deputy Governor-Operations of the Bank of Zambia; at the official opening of Bank of China’s new premises, Lusaka, 9 December 2008. *  *  *  • Honourable Minister of Finance and National Planning, Dr. Situmbeko Musokotwane, MP; • His Excellency – the Chinese Ambassador to the Republic of Zambia; Mr. Li Qiangmin; • Managing Director of the Bank of China (Zambia) Limited; Mr Du Qiang; • Distinguished Invited Guests; • Ladies and Gentlemen. I am greatly honoured for having been invited to speak on the occasion of the official opening ceremony of Bank of China’s new premises. Ladies and Gentlemen As part of the on-going Zambia-Chinese relationship, the Bank of China was established in 1997. Since then the Bank has recorded tremendous progress. Distinguished Invited Guests During the past 8 years, the overall financial performance and condition of the banking sector has been satisfactory. The sector has continued to expand and we anticipate increased economic and investment activity in the period ahead. Banks are expected to continue to provide the required level of finance to consolidate the economic gains registered so far. The Bank has achieved tremendous growth since its inception in 1997. During the last eleven years, total assets have increased by 325% to K507.9 billion in October 2008 from K13.8 billion in December 1997. Regulatory capital increased by about 1,000% to K41.9 billion in October 2008 from K3.8 billion December 1997.
If the Romanian companies are unable to gain market shares in the tough competition with rivals on both aforementioned markets, the gap between imports and exports widens, causing the deepening of the trade deficit and hence of the current account deficit; the latter is already at a level that raises concerns, also in terms of its financing by flows deemed stable (such as FDI and European funds), which have no longer fully covered it. Romania’s sizeable external imbalance is singular in the region in terms of size and trend. It owes to the faster growth of domestic absorption than that of domestic output, as well as to nonprice competitiveness issues of the Romanian economy manifest in certain production sectors. Relevant from this perspective is the unfavourable comparison with Czechia, Poland and Hungary, three countries where, the same as in Romania, monetary policy is managed under the inflation targeting strategy and there is a floating exchange rate in place. 3/4  BIS central bankers' speeches  Speaking of the exchange rate, I cannot help mentioning that the hasty adoption of Government Emergency Ordinance No. 114 at the end of last year contributed, through the uncertainty created on the market, among others, to an episode of moderate depreciation of the domestic currency in January 2019. Thus, the relative stability of the exchange rate of the leu, which we have all got used to, was a bit affected.

Instead, this caused a significant current account deficit widening. Therefore, in order to preserve the GDP growth trend, economic policies should focus on its sustainability. In the quest for supporting potential growth and increasing the resilience of the economy, there is no substitute for a coherent mix of macroeconomic policies and structural reforms. A durable economic growth is extremely important also from the perspective of euro adoption, as it would lead to progress in convergence, which will put us on the right track for achieving the goal of joining the Eurozone. In order to stay on course, economic growth and convergence must advance in line with economic fundamentals. Otherwise, the gains, as spectacular as they might be, could be jeopardised by abrupt setbacks. At the end of the day, forcing convergence or postponing convergence is equally harmful. I had the honour to be one of the vice-presidents of the National Committee for Substantiation of the National Euro Changeover Plan, founded last year, which prepared a set of documents that emphasise the need for a substantial degree of convergence before entering the euro area. In fact, it is the Maastricht Treaty that explicitly stipulates the need for “a high degree of sustainable convergence”. Yet, this requirement seems to have been overlooked sometimes. Let me point out that by convergence I refer to all four types of convergence that must be taken into account: nominal, real, institutional and structural. Nominal convergence is easily quantifiable, as the specific criteria are clearly defined in the Maastricht Treaty.
5  All speeches are available online at www.bankofengland.co.uk/speeches  5  With returns on a range of assets so low by historical standards, any signs that risks have declined and traditionally higher yielding assets are safer are tempting. And anyone looking for confirmation of such a bias can find it in recent performance. With low corporate default rates and low market volatility, portfolios of corporate bonds have outperformed cash and sovereign bonds (slide 8). But of course we know from the small print that the past is not always a good guide the future. So, as the Bank of England’s Financial Policy Committee stated in March: “…there are material risks associated with interest rate volatility. The principle risks are in debt markets.” 6  But are these a risk to the wider economy? It’s reassuring that easy conditions in markets have not led the corporate sector to take on an unusually high level of leverage. As a multiple of earnings, corporate debt in this country is around its long term average level. Nevertheless, developments in corporate debt bear close scrutiny, because we cannot take for granted that it will stay this way. The United States, where corporate debt levels have been testing previous highs, shows this to be more than a hypothetical possibility. The UK’s largest companies – those with access to capital markets – report that credit has become easily available. 7  Corporate debt in the UK has been growing at a not insignificant annual rate of 6.2%.

Price statistics, particularly consumer price statistics, are a key set of indicators reflecting the ability of the central bank to fulfil its main task – price stability. Nevertheless, not only consumer price statistics are in the sphere of our interest. As it is known, we operate in the inflation targeting regime. Since this is a forward-looking framework, we undergo a forecasting exercise which results in a comprehensive macroeconomic forecast every quarter of the year. This forecast is based on a number of economic variables and national accounts figures are at the centre of our interest. I do not want to list all the other statistics necessary for analytical and forecasting activities at our bank, but let me mention at least one more area: residential property prices. Property prices played an important role in the global financial crisis. From this point of view, our discussions with the Czech Statistical Office in this field held in recent years should not be considered a waste of time. We have touched upon many methodological issues not only in residential property prices as such, but also in related statistics like owner-occupied housing within the consumer price index. The central bank also acts as a producer of statistics. It is not necessary to mention all standard statistics compiled by central banks such as monetary aggregates and their counterparts, interest rates statistics, statistics on other financial intermediaries, balance of payments or financial accounts statistics.
In particular, with an ever globalised world, competition is no longer local – the private sector cannot just compete locally when the flows of goods, capital and talent are global. Furthermore, in a global stage, long-term relevance can only be sustained through genuine competition-driven competitiveness rather than through public sector support. To develop both an appropriate incentive structure and a market-driven environment, it is crucial that market and price distortions are removed and greater competition is introduced, such as through deregulation, liberalisation and greater transparency of rules and regulations. While the government moves towards this, the private sector must be ready to operate in this more open and competitive environment. An example of an industry within Malaysia in which a private sector-led competitive environment is being developed is the  BIS Review 158/2009  5  financial sector. Over the last several years, the domestic financial sector has been gradually liberalised and subjected to greater global competition, with the dual aims of enhancing the role of the financial sector as a source of growth and as a key enabler and catalyst of economic growth. Growth of the financial sector also strengthens Malaysia’s economic interlinkages with other economies. Liberalisation is done after ensuring that the financial institutions are in a state of readiness to compete in a more competitive and challenging environment.

In this context, there are several key issues that Malaysia needs to address to face a new world, a world in which trend growth will be lower, capital will be less readily available and at higher cost, competition more intense, short-term capital flows remain volatile and protectionism could rear its ugly head again. Malaysia also has to position itself to seize the opportunities to fully benefit from the growing economic integration and dynamism in Asia. Yet at the same time, Malaysia must be ready to face more intense competition for foreign direct investments (FDIs) and markets from key Asian neighbours. Aftermath of the crisis – emergence of a new world After one of the worst crises in modern history, the global economy – led by the emerging economies, especially China – is now en route to recovery but this revival is yet entrenched and risks remain on its sustainability. The global economy is still fundamentally weak, with the recovery uneven and growth remains highly dependent on policy support of very large fiscal stimulus and aggressive monetary easing around the world. The crisis-affected advanced economies continue to face rising unemployment, weak financial systems, ongoing de-leveraging of households and financial institutions with weak balance sheet. Although financial markets have begun to stabilise following extensive policy support, the progress of financial sector resolution and reforms in the advanced economies is far from complete.
But expansion in these markets is not, on past experience, a zero sum game: it is likely to lead to more, not less, activity in London since London is the major interface with the rest of the world in the European time zone. •  The economics of financial market activity point to concentration, to gain economies of scale and facilitate better management control. That is why many firms have been moving their operations, and even headquarters, to London as the preferred financial centre. Uncertainty about UK participation in the single currency has been with us for some time. But undeterred by that uncertainty, firms have continued to concentrate their trading activities in London. •  London has an unrivalled range of markets and ancillary services; and an associated deep skill base; and an unbureaucratic approach to financial regulation, which has been developed working with the grain of the market. 27. All these advantages and more help to explain why there are more people working in financial services in the City of London -- over 600,000 -- than there are in the entire population of Frankfurt and its surrounding region! 28. None of this gives any grounds for complacency: the financial services industry is an intensely competitive business. But importantly, if we can harness the strengths of the London markets to the opportunity presented by the euro, I believe that will be an important contribution to the success of the single currency. Of course, London will benefit. But London is not just a UK financial centre.

The upgrade of CGO has been effected utilising CREST software -- deliberately, in order to align those two electronic settlement systems -- CGO for gilts, CREST for equities -- more closely. This was a considerable technical achievement, because the operating processes in the two markets are different -- equities settle on T+5, gilts on T+1 (and in some cases T+0); the equity market comprises a large number of relatively moderate-value deals, the gilt market a smaller number of much higher-value deals; hence delay in settlement in gilts is much more disruptive, and needs to be much less frequent, than in equities. Overcoming these differences has been a considerable challenge to the Bank team and I would like to pay tribute to their dedication and expertise and to their achievement in bringing the CGO upgrade to a successful and so far smooth launch just last week. I say this without immodesty because, though I was closely involved in overseeing the project, it was their technical proficiency that delivered the goods. 37. But this achievement has a wider significance. By utilising CREST software in CGO, we have now achieved for the market much of the benefit sought by those who favour a merger of the two systems. In particular, both utilise the same hardware, and the same software application; they operate on the same networks; and users can access both systems via a single terminal using a common gateway.
Over the past six months, corporate profitability has remained very low and leverage ratios have generally increased, intensifying the balance sheet vulnerabilities of the non-financial corporate sector. In addition, banks have continued to apply conservative lending standards, albeit at a moderating degree. Improvements in financial market conditions have allowed larger firms to partly substitute bank loans with market-based debt or equity. Looking forward over the next few months, the overall balance sheet conditions are expected to remain challenging, as firms’ access to external finance is not likely to improve significantly in the coming months, while profitability is likely to remain low. Low profitability and high leverage are putting a severe strain on firms, making them less resilient to adverse shocks. As a consequence, some measures of corporate credit risk, such as unconditional expected default frequencies, remain high for most industries although they had declined recently for most sectors. (See Chart 5). Conditions in the euro area commercial property markets have deteriorated further during the past six months and continue to be a potential source of risk to many financial institutions. Capital values – i.e. commercial property prices adjusted for capital expenditure, maintenance and depreciation – for prime property had declined by an average of 12% (year-on-year) in the third quarter of 2009. All euro area countries had recorded declining capital values compared with the third quarter of 2008.

The major counterparts to the adjustment of the US current account balance have continued to be the surplus economies of eastern Asia and the oil-exporting  1  The cut-off date for data included in the December 2009 FSR was 27 November 2009. BIS Review 168/2009  1  countries. The current account surplus of Japan is projected to narrow to 1.9% of GDP in 2009, while China’s current account surplus is forecast to decline by 2 percentage points to 7.8% GDP in 2009, as robust domestic demand has underpinned imports growth which has exceeded that of exports. However, this ongoing adjustment of global imbalances is rather fragile, as it remains largely driven by cyclical factors related to the financial crisis rather than by structural factors. Looking ahead, there is a risk of re-emergence of sizeable global imbalances stemming from various sources, including a possible widening of the US current account deficit as the economy recovers and if the substantial fiscal stimulus persists. Turning to external risks stemming more directly from the US economy, there were some positive developments, but vulnerabilities also remain. The US housing market has shown some signs of stabilisation over recent months. Both home sales and housing construction appear to have bottomed out since earlier this year, while the decline in house prices ceased in July 2009. The Case-Shiller futures price index for ten major US cities now indicates that house prices are expected to remain broadly flat over the next three years (see Chart 1).
However, credit to low-income people does not come from banks, where they are not eligible. They resort to non-financial institutions instead, where looser credit standards come at the cost of higher interest rates.  Adequate economic policies will help increase the credit worthiness level of low-income citizens, which then can apply for sustainable loans.  Also, good economic policies means an increase in the quality and complexity of manufactured products within an inclusive economic growth. It means higher research and development expenditures that will determine an increase in the supply of medium and high tech goods.  The global economy is still in a favorable position, albeit decelerating, while the uncertainty is rising. New opportunities, but also new risks and new challenges emerge, such as Brexit, the trade and currency war, the cold war of technology, the debt crisis, money laundering, climate changes, higher inequality. All these aspects must be addressed as complementary to current policies.  Besides the discussions that took place here, related to the soundness of the financial sector and the need to have financial services widely accessible, I would like to underline two main points, in which I strongly believe. 2/4  The first one is that “There is no financial inclusion without social inclusion”  As we look at the development indicators, we can notice, on the one hand, that significant quantitative progress have been achieved in reducing the worldwide poverty across countries.

One the other hand, however, there are still important and rising differences related to the living standard, healthcare, education, sanitary conditions within the countries.  Inequality among the citizens affects their living standards, state of mind and the democracy itself.  Interest in social spending issues has risen globally over the last decade. The IMF has voiced increased concerns about rising inequality, the need to support vulnerable groups, to address demographic, technological and climate developments. In their 2019 report, social spending is mentioned as a key policy in maintaining social and political stability.  Even companies seem to intend to change their strategy. After being accused of an obsession with short-term earnings while neglecting investment, depressing wages and failing to pay for the negative externalities they created, some changes in the corporate decision-making are expected. The second point is that “There is a strong link between financial stability, on the one hand, and capital and financial discipline, on the other.”  A competitive and stable economic framework has to ensure an appropriate balance between rights or liberties and obligations or accountability of entrepreneurs.  While many efforts have already been made on the macroprudential side, we should also pay attention to the micro level. When a crisis hits, you have to have your house in order. That means you have to address preemptively your own vulnerabilities.  At the heart of any economy lies the capital, which in developing countries is the main factor of production.