samchain/econo-pairs-v1 huggingface dataset:
This owes largely to the nominal appreciation of the peso since December. Going forward, it incorporates the impact of tighter global financial conditions on the dollar. In any case, the pass-through of the exchange rate reduction to inflation is expected to be relatively slow. Such a phenomenon usually occurs in episodes of currency appreciation, especially considering that corporate margins have not recovered all the decline estimated for previous years. For the 2023-2025 period, our projection considers an oil price around 8% lower than expected in December, which reduces the variation of the volatile component of the CPI. The convergence of inflation to the 3% target still requires the economy to accommodate the high levels of spending it showed in 2021 and 2022. Non-mining GDP accumulated three quarters of contraction during 2022. In the central scenario, this trajectory will be temporarily interrupted in the first quarter of 2023. Towards the second quarter of this year, the output gap will narrow again and will become negative during the second half of 2023 and all of 2024 (figure 12). In the central scenario, activity will accumulate growth in the order of 1.5 percent between 2023 and 2024, not far from our forecast in our December MP Report. For 2023, the growth range is revised upwards, to -0.5 and +0.5 percent (between -1.75 and -0.75 percent in December). This mainly responds to the slower pace of consumption adjustment in late 2022 and upside surprises in early 2023.

Between now and the 15 November, the Bank will therefore be running a consultation programme that will provide the public with a greater familiarity with polymer banknotes. The consultation will, in turn, provide us with a better understanding of the public’s views on the proposed change and whether such a change would meet with broad public acceptance. BIS central bankers’ speeches  1  We will be holding around 50 events across the UK to enable the public to see and feel examples of polymer notes, and to deliver feedback to the Bank. We will hold events in 13 major shopping centres to allow shoppers to see and handle specimen notes. And we will be running over 30 discussion events with audiences including regional chambers of commerce and retailers. A market research company will separately be conducting another 36 focus groups and carrying out a face-to-face survey with 2,000 people to collect further feedback. We will also publish a range of useful material on our website including a facility for the public to provide feedback directly to us. And there will be a specific display about polymer in the Bank’s museum for anyone visiting London who wishes to learn more. In parallel with the public consultation we will conduct further outreach with the cash handling industry, to confirm our understanding of the impact on industry of a switch to polymer.
Starting in its December 2015 statement, the FOMC also indicated that it anticipated continuing reinvestment until normalization of the level of the federal funds rate was well under way. The FOMC also indicated, starting in its September 2014 Policy Normalization Principles and Plans, that it intended to reduce the Federal Reserve's securities holdings in a gradual and predictable manner primarily by ceasing to reinvest repayments of principal on its securities holdings. The FOMC’s strategy of waiting to begin normalizing the balance sheet until normalization of the federal funds rate was well under way had several advantages. Most importantly, it reduced the likelihood that an unexpected adverse shock to the economy not long after the start of policy tightening would have necessitated a return to the zero lower bound on the federal funds rate and potentially a reversal in balance sheet normalization. Instead, the FOMC’s approach promotes the use of the federal funds rate as the active monetary policy instrument, an instrument with which the FOMC has much greater experience. In addition, delaying balance sheet normalization allowed the FOMC to meaningfully assess the efficacy of its tools to control shortterm interest rates with a large balance sheet, and thereby judge how patient it could afford to be in reducing the balance sheet to its longer-run level.6 From an accounting perspective, the decline in the balance sheet will, at a high level, resemble a mirror image of its earlier increase.

The maturity composition of the Treasury portfolio, not shown in the figure, would be different from what it was before the financial crisis. On the liability side, at normalization, non-reserve liabilities in the median scenario would be considerably larger than they were pre-crisis. Some of the growth in the reverse repo programs we have observed since the crisis might be a second-round effect stemming from the growth in reserves, and therefore some decline in this category is possible as the overall balance sheet size declines. However, my overall read is that much of the increased demand for non-reserve liabilities, particularly currency in circulation, is likely to be persistent past normalization, and indeed demand for reserves is also likely to be higher.7 But what is the longer-run appropriate size for the balance sheet?
G7 Current Account Imbalance, Sustainability and Adjustment, NBER y Chicago University Press. Gorton, G. (1988), “Banking Panics and Business Cycles”, Oxford Economic Papers, 40, pp. 751-81. Gourinchas, O. and H. Rey (2007), “From World Banker to World Venture Capitalist: The US External Adjustment and the Exorbitant Privilege”, in Clarida, R. (ed.) G7 Current Account Imbalance, Sustainability and Adjustment, NBER y Chicago University Press. Hausmann, R. and F. Sturzenegger (2006), “The Implications of Dark Matter for Assessing the US External Imbalance”, CID Working Paper No. 137, Harvard University. Muellbauer, J. (2007), ‘Housing, Credit and Consumer Expenditure’, presented at Housing, Housing Finance, and Monetary Policy, organized by the Federal Reserve Bank of Kansas City, Jackson Hole, WY. Laxton, D. and G. M. Milesi-Ferretti (2005), “How Will Global Imbalances Adjust?”, in World Economic Outlook, Appendix 1.2, International Monetary Fund. Obstfeld, M. and K. Rogoff (2007), “The Unsustainable Current Account Revisited”, in Clarida, R. (ed.) G7 Current Account Imbalance, Sustainability and Adjustment, NBER and Chicago University Press. Terrones, M. (2004), “The Global House Price Boom”, in World Economic Outlook, chapter II, International Monetary Fund. 8  BIS Review 124/2008  Figure 1 Current Account by regions (% of world GDP) 2 1 0 -1 -2 90  92  94  US  96  98  00  Japan  Euro area  02  04  06  Rest of the world  Source: International Monetary Fund.

But even if it is discovered that the risktaking channel is something worth taking into account, it is not so easy to see how this should be done in practice. I cannot see, for instance, that it is realistic to believe that a central bank would refrain from cutting its policy rate below a certain level on the grounds that this might lead to greater risk taking in the economy. Should developments in the economy as a whole warrant a low policy rate and there are no tangible signs of increased risk taking, it would be very difficult to justify such a policy. However, it is of course important  for instance, Geanakoplos, J., “Solving the Present Crisis and Managing the Leverage Cycle”, FRBNY Economic Policy Review, August 2010. 5  See, for instance, Gambacorta, L., “Monetary Policy and the Risk-Taking Channel”, BIS Quarterly Review, December 2009, Ioannidou, V., S. Ongena and J.-L. Peydró, “Monetary Policy, Risk-Taking and Pricing: Evidence from a Quasi-Natural Experiment”, European Banking Center Discussion Paper No 2009-04S, 2009, Jiménez, G., S. Ongena, J.-L. Peydró and J. Saurina, “Hazardous Times for Monetary Policy: What do Twenty-Three Million Bank Loans Say About the Effects of Monetary Policy on Credit Risk?” CEPR Discussion Paper No. 6514, 2009, Altunbas, Y., L. Gambacorta and D. Marques-Ibanez, “Does Monetary Policy Affect Bank Risk-Taking?” BIS Working Papers No 298, 2010, Delis, M. D. and G. Kouretas, “Interest Rates and Bank Risk-Taking”, Munich Personal RePEc Archive, MPRA Paper No.
Previously, forecasts were instead based on the assumption that the repo rate would remain unchanged during the forecast period. What consequences does this change have? Monetary policy could previously be described with a simple policy rule. If the forecast for inflation was below two per cent, the repo rate would normally be cut, and it was above two per cent the interest rate would be raised. If the forecast was very close to two per cent the repo rate would remain unchanged. Of course, this rule could not capture all of the nuances in the monetary policy discussion, but it provided a rough explanation of the monetary policy decisions. Now we no longer use this simple policy rule. According to our new way of thinking, if the inflation forecast is close to two per cent, the repo rate should normally develop in line with market expectations. This could mean that the repo rate should be raised or lowered in a number of stages over the coming two-year period. The new way of thinking thus means that, unlike before, the monetary policy discussion is now based on an interest rate path that stretches across the entire forecast period. This method of working enables clearer communication regarding future policy. Although it cannot, of course, be regarded as a commitment from the Riksbank that the repo rate actually will follow a particular path. Each time we make a decision, we take a stance on the repo rate path, on the basis of the information available at the time.

In particular, the cooling in the housing market points towards weaker growth than expected next year. The picture of the euro area and other parts of the world is that developments have rather been slightly stronger than we assessed in June. Back in June, we envisaged fairly high growth in Sweden over the coming years. The statistics received since then confirm that the economy is growing at a good rate. Household consumption and housing investment have grown more rapidly than expected. However, both the number of persons employed and the number of hours worked have been lower than expected. This reflects the fact that productivity growth has been surprisingly high again. Companies have thus been able to increase production without needing to take on so many new employees. Most indications are nevertheless that the labour market will continue to improve. Generally high lending and the fact that household indebtedness and house prices are continuing to rise rapidly support the picture of strong demand. Rapid increases in energy prices have contributed to inflation being higher than the Riksbank’s forecast over the summer. However, the oil price has fallen during the autumn, although it is as usual difficult to know whether this trend will continue. The oil price, like other energy prices, has a tendency to fluctuate considerably. There has been a recent downward adjustment in expectations of future energy prices. BIS Review 96/2006  1  The strong productivity growth will contribute to unit labour costs being low this year.
Reducing money market strains may require injecting more reserves than banks want to hold at the target rate, creating an excess that can lead to a decrease in interbank money market rates. This tension is a potential feature of implementation frameworks that rely on scarcity of reserves. If reserves become less scarce, and if you cannot pay interest on reserves, you will lose control of the interest rate that you are trying to steer. Francesco Papadia’s presentation later today will illustrate some of the flexibility that the European Central Bank (ECB) had in its framework in 2007 relative the Fed. It might be difficult to recall, but for the period prior to mid-December 2008, the Desk was directed to hit a point target for the federal funds rate significantly above zero. The Federal Reserve did not have authority to pay interest on reserves until October 2008, so maintaining a scarcity of reserves was the only method available to control the federal funds rate. If the Desk had allowed reserves to increase above predicted demand at the target rate, the traded rate would have fallen well below the target rate set by the Federal Open Market Committee (FOMC). To maintain scarcity and thus control, the Desk had to “sterilize” operations aimed at easing strains in money markets; that is, it had to offset any injection of reserves by removing an approximately equivalent amount from the system. One possibility would have been for the Fed to borrow from its traditional counterparties, the primary dealers.

I am not claiming that the current framework is perfect, or that it is necessarily better than the old framework augmented with the new tools used to directly absorb excess reserves, but it is useful to have flexibility in how to implement monetary policy. We have now seen in practice that changes in administered rates can effectively move market rates – both because effective competition helps bring administered and market rates closer together and because the mere existence of administered-rate facilities, like the RRPs I mentioned earlier, can affect competition between private borrowers and investors even when these facilities see little usage. As we learn more about the practical aspects of using these mechanisms to influence money market rates in the United States, a much wider range of potential operating frameworks becomes viable. It will now be important to make sure that all the costs and benefits of different approaches are considered carefully to get the most effective framework for monetary policy implementation. In particular, there are important trade-offs that may need to be considered in a framework that can flexibly provide liquidity for monetary policy implementation and broader transmission. It is possible, for example, that financial market participants may anticipate that the central bank will make liquidity plentiful during times of stress and that this could reduce their incentives to manage their liquidity conservatively. For banks, new Basel III liquidity regulation, such as the liquidity coverage ratio and the net stable funding ratio, partially mitigates this concern.
The reduction in headline inflation over the projection horizon, reflects strong energy-related downward base effects throughout the course of 2023, the gradual impact of the normalisation of the ECB's monetary policy which started early in 2022, the weaker economic growth outlook and the assumed decline in energy and food commodity prices, in line with futures prices. The underlying assumption in all this is that long-term inflation expectations will continue to remain anchored. The Cyprus economy  2/4  BIS - Central bankers' speeches  As regards Cyprus, the economy showed notable resilience in 2022, recording significant growth of 5,6%, despite the negative international environment. This is in part due to the higher than expected activity in the tourism industry, the nondependence of the Cypriot economy on Russian gas, as well as the reality that the Cypriot banking sector has very limited exposure to the Russian economy and therefore has not been affected by the sanctions on Russia. In particular, according to the latest available data, deposits from Russian Federation citizens amount to only 2,17% of total deposits of the Cyprus banking sector at the end of January 2023 , while loans amount to only 0,2% of total loans. Economic growth in Cyprus was supported by new lending by the Cyprus banking sector and by foreign direct investment. For example, largely owing to the enactment of new incentives, including the facilitation of a fast-tract process for incoming firms, a large number of high value-adding foreign companies have been attracted to Cyprus.

Constantinos Herodotou: Economic trends and outlook for euro area, impact of ECB monetary policy and outlook for Cyprus economy Keynote address by Mr Constantinos Herodotou, Governor of the Central Bank of Cyprus, at the Annual Cyprus Maritime Forum, Limassol, 7 March 2023. *** I would like to thank Capital Link for organizing the Annual Cyprus Maritime Forum and for offering me the opportunity to talk about current economic issues. I will discuss inflation developments by contrasting the euro area with the US, in order to give a clearer focus on the dynamics and differences of the economic trends and inflation. I will also talk about the Cyprus economy, focusing on the reasons that kept our economy strong and the factors that will help safeguard its future path. Overview of international and euro area economic developments Let me start with contrasting economic and inflation developments in the US and the euro area. Even though both economies were hit by rising inflation, the factors behind it have been different. In the United States, demand factors have been the main determinants of the upward inflation trend, while in the euro area, price increases were, initially, mostly driven by the supply shock caused by the energy crisis. The post-covid demand recovery in the US was faster and stronger than in the euro area. As a result, the Federal Reserve moved earlier with actions to curb the accelerating inflationary pressures and in particular it started raising interest rates in March 2022.
Regression results using CSI display neither a flattening of the short-run Phillips curve nor signs of nonlinearities. The lower part of Table 1 reports the estimation results using CSI inflation. Starting with the linear specification, the full-sample and early-sample results are very similar to 2/4  BIS central bankers' speeches  those using core PCE price inflation. This is not altogether surprising since the two series track each other closely during the first half of the sample. The big difference is in the later subsample, where the coefficient on the unemployment gap is not that much smaller than in the early sample, and larger than in the full-sample estimation. Moreover, there is little evidence of nonlinearity in the Phillips curve relationship in either the full or later samples. Evidently, both the flattening of the Phillips curve and evidence of nonlinearities depend on including goods and other categories that are primarily influenced by non-cyclical factors. These results suggests that the Phillips curve is alive and kicking when inflation is measured using categories that are cyclically sensitive, rather than buffeted by supply and other shocks. Based on this analysis, the trade-offs between employment and inflation the Fed faces haven’t fundamentally changed. That does not imply there have not been meaningful changes in inflation dynamics—inflation persistence has fallen significantly for the CSI as well. This means that transitory shocks no longer get embedded in inflation expectations, but instead have relatively short-lived effects on inflation.

In many ways, the situation is deteriorating. As we meet, it is unclear when and how we will be able to return to calmer financial waters. Today I want to begin by discussing why central banks care about financial stability. In a second part, I will try to draw some preliminary lessons for central banks from the current market dislocation. As I said at the outset, the credit crisis is unfortunately still unfolding and its future course is uncertain. Naturally, therefore, we face a lot of questions to which there  1  See for example P. Hartmann, S. Straetmans and C.G. de Vries, 2006, “Banking system stability: A crossAtlantic perspective,” in M. Carey and R.M. Stulz (eds), The Risks of Financial Institutions, The University of Chicago Press, Chicago. BIS Review 141/2007  1  are no clear answers. For the purpose of today’s discussion, I will confine my remarks to the following two issues: The first one addresses the question of the optimal degree of transparency with regard to central bank liquidity operations; the second one investigates the implications of unusually high risk premia in short-term interest rates for the conduct of monetary policy. 1. Why do we care about financial stability? Why does a central bank like the Swiss National Bank care about financial stability? After all, as is the case in a number of other countries, the Swiss central bank does not have a legal mandate to supervise and regulate banks.
Singapore is now third largest FX centre globally after London and New York. Two trends augur well for Singapore as FX and derivatives centre. •  One, regulatory reforms to promote greater transparency in markets will spur growth of exchange-traded instruments globally. This “futurisation” trend plays to SGX’s strength in derivatives and it has seen strong growth in equity index futures trading. •  Two, investors in Asian time zone will need a comprehensive suite of pan-Asian risk management products. SGX is well-placed to fill this need. SGX launched six Asian FX futures contracts in 2013 and plans to launch RMB futures in H2 this year alongside other currencies. 52 Insurance. Singapore is Asia’s leading insurance centre. Offshore insurance business in both direct and reinsurance markets is growing strongly. The offshore non-life insurance business has grown by average 11% per annum in the last 3 years. Singapore has also built up significant capacity and expertise for large, complex and specialty risks. Most large reinsurance and specialty Asian risks can now be fully placed in Singapore. 53 RMB business. There has been strong growth in RMB activities since the launch of RMB clearing services in Singapore in 2013. Growth is broad-based across various activities – deposits, trade finance, cash management and FX trading. Banks have expanded their RMB capabilities to serve needs of corporates based in Singapore and region. Based on SWIFT’s recent data, Singapore is currently the top RMB offshore clearing centre outside China/HK.

•  Support financial stability. Unsustainably high property prices could create risks of financial stability given the banking system’s loan exposure to property. •  Encourage greater financial prudence. The combination of global low interest rates and high asset prices could lead to some households over-extending themselves financially. 26 How far have these policy objectives been met? •  There are some indications that property market is stabilising. The private property price index has moderated by cumulative 3.3% over the last three quarters. This has alleviated the pressure on headline inflation, as I have explained earlier. •  The banking system is resilient to property market shocks. Stress tests of our banks during last year’s Financial Sector Assessment Programme by the IMF showed they were resilient against various stress scenarios. These stresses included a combination of: domestic interest rates increasing by more than 200 bps; unemployment rate rising above 10%; cumulative decline in equity prices up to 70% over three years; and cumulative decline in residential property prices up to 50% over three years. MAS’ own stress test this year – assuming disorderly unwinding of quantitative easing in US and higher level of USD funding squeeze – shows similar results. •  Household balance sheets are in better shape. Last year I highlighted MAS’ concerns over rising household leverage. Property-related measures have helped to strengthen overall household balance sheets in two ways. First, they have tempered the growth of household debt.