samchain/econo-pairs-v1 huggingface dataset:
The increase (measured at an annual rate) in May was 3.1 per cent. At the same time as the economic climate gradually weakened, there were indications that inflation was beginning to rise. The price increases could to some extent be attributed to non-recurring factors - such as higher food prices caused by BSE (“mad cow disease”) and crop failure -but some of the price increase was more difficult to explain. When the exchange rate also weakened substantially in June, there was justified unease that this could have an impact in the form of rising inflation expectations. Given these developments, a majority of the Executive Board of the Riksbank decided on 5 July to raise the repo rate by 0.25 percentage points to 4.25 per cent. There was still considerable uncertainty as to how rapidly the US economy could recover. Nor was there any other economy elsewhere in the  2  BIS Review 79/2001  world that could take over the USA’s role as growth engine. Quite the reverse, the economies in the euro area and Japan were weakening. The Asian economies that had been strongly IT-dependent in their exports were also unable to act as pacemaker. When the Executive Board had to make a decision regarding the repo rate this time, the situation was unusually complicated and uncertain. This was also reflected in the fact that we Board members differed in our judgements but hardly at all in our fundamental analysis.

Banks can also choose to be exposed to sovereign debt in some countries as the alternative (private lending) is riskier given existing legal and institutional imperfections. Finally, the current regulatory setup gives preferential treatment to sovereign exposures, as banks’ exposures to domestic government in domestic currency are subject to low or even zero risk weights. 1/2  BIS central bankers' speeches  While banks’ sovereign exposures in advanced countries are considered to hover at reasonable levels, exposures in many emerging market countries are significant. The current level or its buildup is becoming a relevant concern to emerging market countries, mainly owing to credit and concentration risks. As the sovereign debt crisis in Europe showed recently, the zero risk weight commonly applied to sovereign exposures in domestic currency might not be fully consistent with empirical observations of the risks of sovereign debt defaults. Hence, the default risks of sovereign issuers need to be reflected accurately in risk weights to ensure that banks have appropriate ex-ante incentives to take on such exposures. Besides credit risks, excessive sovereign exposure concentration reinforces the link between sovereign and banking sector stress. In fact, the close relationship between sovereigns and banks is seen as one of the major reasons for the severity of the Eurozone crisis. Therefore, breaking the sovereign-bank nexus is needed in order to strengthen macroeconomic stability. Nevertheless, our prudential treatment of sovereign exposures needs to strike a balance. It has to bear in mind the specific role sovereign debt plays in financial markets.
Set against this, sterling’s strength, essentially against the euro since the dollar rate has remained fairly constant for some time, continues to bear down on some sectors and some regions. Within the MPC we are very conscious of the resulting sectoral imbalances in the economy and you may have seen from the latest minutes that we have discussed the issue at length. One of the standard policy responses in these circumstances would be a fiscal tightening, but active use of fiscal policy in this way is by no means straightforward. In the circumstances, it is not clear how monetary policy in the short run can help in bringing sterling down to what we might regard as a more appropriate level. A decision not to have raised rates would not necessarily have resulted in a fall in sterling. In the context of buoyant domestic demand and a tight labour market pointing to strong underlying domestically-generated inflation,the market might have been left with the expectation that tighter policy had simply been deferred, and this might have had the perverse effect of putting further upward pressure on sterling. Another possibility that the Committee considered was foreign exchange intervention; but there is no indication that market support for sterling at these levels is fragile and any intervention operation that failed would be damaging to the credibility of the Committee and thus of the new UK monetary policy framework.

At the time there was evidence of a breakdown in communication and trust between small firms and their finance providers which threatened the effectiveness of the provision of finance to this sector of the economy. Since that time, the situation has improved, in part against a background of economic growth but also with a change in the structure of small business finance with a move away from overdrafts towards some element of fixed-term  3  BIS Review 19/2000  lending. A particular interest has been financing for high technology companies, focusing attention on the access that technology-based firms have to the equity they need in their early stages. The Bank produced its first report in this area in 1996 and has since held an annual forum with regular meetings with small business groups, venture capitalists and fund managers. Small business investment is especially relevant for Wales given the ongoing need to attract more knowledge-based industries to replace more traditional sources of investment. One final area where the Bank has taken an active role is worth mentioning; and that is in assisting the UK financial sector in its practical preparations for EMU. This was concentrated in the run-up to the introduction of the euro at the end of 1998 but the UK’s readiness at that time has meant that a large part of cross-border business in euro, whether in bonds or equities, is transacted with the UK, particularly in London.
This rate was more moderate than in the first two quarters, when the decline was 1.6% and 1.1%, respectively. The fall-off in activity, which stood at 4% compared with the same period a year earlier, was the result of the marked weakness of national demand, particularly private spending. Only the public components of domestic demand retained positive growth rates, due partly to the inertial component of certain expenditure items (such as purchases of goods and services) and partly to measures adopted to mitigate the decline in demand, such as the State Fund for Local Investment. And, as has been the case since the opening quarters of 2008, the strong contractionary effect on activity exerted by the fall in domestic spending was lessened by the positive contribution of the external sector, largely due to the notable decline in imports. The strong contraction in demand in recent quarters is helping correct some of the imbalances that had built up in the Spanish economy during the boom period. These include the excesses in the real estate sector, high private-sector debt, the external deficit and the inflation differential. However, the adjustment is operating through a considerable decline in activity and the marked destruction of the general business and employment fabric, which is giving rise to a sharp increase in unemployment. The previous strong concentration of resources in the real estate market is diminishing most rapidly, with an acute decline in housing starts.

Data on new orders suggest that output is likely to fall sharply in the first quarter of 2009 as well as in Q4 of last year; further declines in output, if not at the same pace, are likely beyond then. The widening margin of spare capacity will act as a significant drag on costs and prices. Coupled with the deflationary impact of falling commodity prices and the cut in VAT, CPI inflation will continue falling over the year and may go well below the target rate of 2% despite the impact of sterling’s depreciation on import prices. With its inclusion of mortgage interest and other housing costs, the change in the RPI is expected to turn negative. The downturn itself has set powerful contractionary forces to work. Over-indebted households and companies will be pulling back on spending to try and pay down those debts. Although the recent falls in commodity prices will help to mitigate some of the downward pressure on household income, rising unemployment is not only constraining the spending of those losing or not finding jobs but is likely to boost precautionary saving across the household sector. And falling property prices are reducing activity in the housing market and the construction sector. With credit hard to come by, companies will find it difficult to fund new investment projects and few companies would be likely to invest large sums of money even if they could raise the funds. Commercial property prices are still falling rapidly.
If we knew a very good way of calculating the probability of a bubble growing and bursting at some point in the future and of calculating how great an effect it would have, then we would of course have already put this calculation into our models. But unfortunately we have not got there yet, although intensive work is being carried out, not least by the Riksbank, to better capture financial variables in our analyses and forecasts. However, there is a long and difficult road ahead before we achieve what we want. Practical problems and important considerations Let us assume, for instance, that we were to find ourselves in a situation where there is a major risk that a loan-driven bubble in the property market will collapse further ahead and that it will then contribute to a heavy fall in GDP. How should we react to this? If we knew with certainty that this would happen, then it is likely that most of the models we have now would indicate that we ought to cut the policy rate to alleviate the effects on inflation, production and employment. But if we were to cut the rate in such a situation we would also risk blowing up the bubble even more before it burst. This would in turn contribute to the ensuing fall being from an even more over-valued level and the consequences would be even more serious than if we had not cut the repo rate.

This account has been persistently in deficit, although there was a marked improvement in the deficit in 2006 to 6.3% of GDP. In the long run, however, this imbalance needs to be further reduced to a more sustainable level. This can only be achieved to the extent that growth is driven more by export-oriented activities and less by consumption. In view of the large amount of currency in circulation and your interest in ensuring a smooth changeover to the euro, what advice would you give to the public in this regard? As I said earlier, the amount of currency in circulation has been contracting and there is evidence that cash hoards and bank deposits are being converted into euro. We are trying to discourage this premature conversion because portfolio diversification at this stage is expensive and makes little sense. In the case of Maltese lira bank deposits, these will be converted automatically, and at no cost, into euro on the changeover date. As for cash conversions, people who are buying euro currency notes from banks and other financial institutions are having to pay exchange commissions; those who obtain euro notes outside the banking system are being offered an even more unfavourable exchange rate, besides running the risk of receiving counterfeit notes. These early conversions, moreover, constitute a drain on the Bank’s reserves. We are, therefore, encouraging the public to deposit Maltese lira cash holdings into the banking system and retain them in Maltese lira denominated deposits, thereby earning interest.
The economic tenor in California and the rest of America is weary, if not downright weak: Somos fuerte; los otros son flojos. Since the recent economic recession ended, Texas has been responsible for 48 percent of all the jobs created in America. And yet, the Hispanic population is not participating in our economic prosperity in proportion to its weight in the Texas census. BIS central bankers’ speeches  1  The unemployment rate among Latinos here is substantially higher than it is for non-Hispanic Texans. Hispanics earn 36 percent less in hourly wages than non-Hispanic whites; median household income of Latino-headed households in Texas is about 60 percent of median household income of non-Hispanic households. For the U.S. as a whole, Latino-headed households earn about 73 percent of non-Hispanic white household income. Pia Orrenius and our other economists are hard at work in deciphering what accounts for the differences between the economic status of Texas Hispanics and Latinos elsewhere in the U.S. Already, one factor is clear: Hispanic educational achievement in Texas is abysmal. In Texas, as anywhere else in the United States and in all capitalist societies, “you earn what you learn.” Every study known to man, and plain common sense, tell you that income is directly correlated to educational attainment. High school graduates earn significantly more than high school dropouts; a college degree results in greater lifetime earnings than a high school degree; the highest income groups are those with graduate degrees.

Unemployment has increased sharply in countries not far from our own. Given the high levels of available resources, there are prospects of lower than normal interest rates among our main trading partners for some time ahead. There are now signs that the stimulus measures are reviving growth, but production is still lower than it was prior to the crisis. The challenge going forward will be to address the problem of rising unemployment and high government debt in many countries. Why did it happen? When the Queen of England visited the London School of Economics in November last year, she asked her host why no one had foreseen the financial crisis. In July this year, her question was answered by a panel of 33 prominent economists from British universities, government institutions and the business sector. The panel did not cite only a single cause, but a web of causation. An important factor behind the crisis can be found in global macroeconomic developments in the years preceding the crisis. In the 2000s, China made its grand entry into global trade with an attendant surge in production and income. This led to higher demand for inputs, and the prices of oil and other raw materials increased. On the other hand, global consumer price growth was pulled down by exports of cheap goods from China and other countries with low production costs. Interest rates were lowered in many countries to prevent very low inflation or deflation.
The mathematics-phobic Diderot, being unable to respond, is said to have fled the Court! These examples suggest that people can sometimes use gimmicks to confuse opponents and win arguments. Such winnings do not prove or disprove any proposition. They do not add knowledge to the extant body of knowledge. They simply help a crafty person to make a temporary escape from an existing difficult situation. Scientific research is different from the employment of gimmicks to gain temporary winnings. It is the method of using human intellect to discover new knowledge and add that wisdom to the existing body of knowledge until it is disproved by a new discovery. Hence, those who are engaged in scientific research have to conform to a set of accepted principles, guidelines and a code of ethics and morality. To follow such a set of rules when playing the game called scientific inquiry is not an easy task. Yet, one has to do so in order to separate science from what is sometimes known as pseudo-science. Why scientific research? Human knowledge is as old as the history of human beings. Human beings have attempted to understand Nature, by using human intellect and experience, so that they could find answers to questions that had been puzzling them constantly. Some of these questions have been beyond direct observation such as “who created the world?” or “what caused rains?”. Hence, it is quite natural for them to hypothesise answers by using both intellect and experience.

A motorcycle mechanic may likewise see the faulty part and conclude that the fault lies in that part. The deductive approach, on the other hand, requires the mechanic to theorise in his mind and come to conclusions based on empirical findings he would make to support his theory. In the previous black crow example, we may theorise that crows are black and then look for black crows in the real world. When we find one black crow, our theory is proved. A motorcycle mechanic becomes a scientist, if he follows the scientific method in the diagnosis of the fault and the subsequent repair of the motorcycle. It involves starting with an open mind. There are no previously made conclusions or prejudgments. The approach is simply classical, that is, guided by underlying principles and not by the immediate appearance. There are several steps which a scientist should follow when he adopts the scientific method. A good motorcycle mechanic would also follow the same steps. The steps involved in a scientific inquiry are as follows. First, the identified problem has to be stated in clear terms. In the case of a motorcycle, the problem may be that the engine does not start. Second, based on the problem, one hypothesis or several hypotheses as required regarding the cause of the problem should be made. The motorcycle engine does not start because there is no fuel in the tank. Or there is a blockage of the tube that distributes fuel to the engine. Or the electrical system may have failed.
Second, at the global level, tensions have grown in emerging market economies on the back of a stronger US dollar and increased trade frictions. These developments may undermine global growth prospects and ultimately lead to abrupt increases in risk premia. This could trigger a domino effect – leading to a sharp sell-off and further price pressures in assets with stretched valuations – with the potential to spill over to euro area financial markets. Third, in Europe we observe re-emerging debt sustainability concerns, both in the public and private sector. As regards public finances, Italy is the most prominent case at the moment in light of the overall debt level and the political tensions around the Italian government’s budget plans. The strong market reactions to political events have triggered renewed concerns about the 1/7  BIS central bankers' speeches  sovereign-bank nexus in parts of Europe. Although contagion has been limited so far, it remains a possibility. This underpins the call for fiscal discipline and for observing and applying fiscal rules in Europe. But in the non-financial private sector too, debt levels remain high by both historical and international standards. In a number of countries, debt is above thresholds that are normally associated with a debt overhang. And growing debt levels should also be seen in the context of buoyant real estate market developments in a number of countries.

According to Sweden’s central bank, the Riksbank, settlement of instant payments in SEK may be made available on the TIPS platform. If so, this would mean that at least some Swedish real-time payments will not be cleared through P27, which could affect the profitability of the project. Norges Bank is aware that the industry is also assessing other possible Norwegian solutions for better real-time payments in Norway. In its letter sent in October to Finance Norway and the P27 banks in Norway, Norges Bank called upon the banks to continue this work. The objective must 2/5  BIS central bankers' speeches  be to make the necessary adjustments to the Norwegian infrastructure as quickly as possible to give both businesses and private individuals in Norway access to modern real-time payments on a 24/7/365 basis. The technological set-up should be adapted to customers’ needs, particularly businesses, while also eliminating interbank settlement risk. As far as possible, the set-up should also be suitable for use in future solutions, such as P27, including a system for control of reserve cover at Norges Bank. Reusing a technological set-up will keep total costs down. Establishing a satisfactory Norwegian solution for instant payments will also decouple P27 work from any deadlines for the system in Norway, which in time may increase the chances of success for the P27 initiative. A common infrastructure for all payments has given Norway an important competitive advantage, provided economies of scale and facilitated interaction across the banking sector.
As I mentioned earlier, the UK economy has been growing rapidly. Over the past year, job creation has been the quickest on record, pushing unemployment down to 6.5 per cent. The economy is finally producing as much as it did on the eve of the crisis in 2008, and inflation is back near its 2 per cent target. In short, the UK economy is starting to head back to normal. 1  Bank of England founding charter, 1694. BIS central bankers’ speeches  1  As the economy normalises, Bank Rate will need to start to rise in order to achieve the inflation target. But the MPC has no pre-set course and the timing of any increases in interest rates will be determined by the data. In this regard, the Monetary Policy Committee (MPC) is balancing the implications for inflation of hard evidence of sustained economic momentum against conflicting signals over the degree of slack in the labour market. While some indicators such as wages suggest that there was more labour supply than we had previously thought, it is also true that spare capacity is being used up a bit more rapidly than we had expected. A key judgment for the MPC is when and to what extent these developments will translate into real wage growth, and in turn that wage growth into price pressures. Next month’s Inflation Report provides the next opportunity to update our thinking on these important questions. A durable expansion rests ultimately on moving from anaemic to strong productivity growth.

I therefore, appeal to all banks operating in Zambia to show more commitment to the growth and development of our country by; •  Opening more branches, especially among our rural communities;  •  Installing more ATMs;  •  Providing more loans that will increase the productivity of our economy; and  BIS Review 107/2007  1  •  Encouraging more Zambian to open bank accounts through provision of easily accessible and affordable products and services. These developments, Ladies and Gentlemen, will greatly contribute to the expansion of economic activities, which will have a positive bearing on poverty alleviation. I am pleased to observe Standard Chartered’s commitment to growth and reinvestment. However, you will all agree with me that those who have more should do more. I therefore look forward to seeing more from Standard Chartered Bank Zambia, as it is one of the leading banks in the country. Mr Chairman, let me conclude by thanking you for inviting me to officiate at this important event. It’s now my pleasure to officially open the new branch of Standard Chartered Bank Zambia at Crossroads Shopping Mall. Thank you. 2  BIS Review 107/2007