samchain/econo-pairs-v1 huggingface dataset:
But it is equally important not to give rise to unrealistic expectations about how fast potential output can grow. The Central Bank’s analysis and forecasting work always aims to answer this question, which is one of the most important in monetary policy implementation. Inflation subsided somewhat in 2012, falling from 6½% at the beginning of the year to just over 4% at year-end. The Bank’s February forecast assumed that this trend would continue, provided that the króna did not weaken further. According to the forecast, inflation should be close to target around the middle of next year. Whether that happens earlier or later depends primarily on developments in the exchange rate. It was therefore a disappointment to see how much prices rose in February, raising twelve-month inflation once again. It is always imprudent to read too much into individual measurements, and it has yet to come to light how much of that increase was based on temporary factors. Furthermore, the exchange rate has risen more than 5% since the beginning of the year, which could affect the next measurements. Nonetheless, this inflation measurement gives good reason for caution, and if the role of temporary factors proves smaller than might appear at present and inflation declines to the target more slowly than previously forecast, it will be necessary, other things being equal, to withdraw monetary accommodation sooner than would otherwise be required. The Central Bank’s interest rates have been unchanged since November 2012, when they were raised by 0.25 percentage points.

Exchange rate volatility vis-à-vis the euro area has declined, while it would continue to exist vis-à-vis the US dollar even after integration. The as yet more flexible labour market ushered in by the transition period II of the Bilateral Agreements I is the flagship of Swiss economic policy. It keeps unemployment and the resultant national costs low in the long term and strengthens the incentives for individual performance. It is essential to translate openness and flexibility, also with respect to internal structural reforms and external relations, into autonomously implemented reforms and a practical global orientation. BIS Review 49/2004  1
First, the slower pace of GDP this year is expected to close the positive output gap. In recent years, GDP was growing faster than potential. Second, the fall in global oil prices in Q4 2018 and the deregulation of the electricity distribution market have exerted a dampening effect on inflation. Third, the two rounds of monetary policy tightening last year by MAS will continue to have a restraining effect on inflation. CPI-All Items inflation for the year is projected to be between 0.5 and 1.5%. Private road transport costs could pick up slightly from 2018 with higher car prices more than offsetting lower petrol prices. Accommodation costs are likely to decline, but at a slower pace this year. Overall inflation in Singapore remains well below the historical average. MAS’ monetary policy stance remains appropriate against the backdrop of subdued inflation and weakening growth prospects. Last year, MAS began the process of monetary policy normalisation by exiting from the zero percent appreciation path of the nominal effective exchange rate $ policy band. MAS increased slightly the slope of the policy band in April 2018 and again in October 2018, against the backdrop of healthy economic growth and gradually rising inflation. In April this year, with inflationary pressures stabilising and the output gap beginning to narrow, MAS kept the policy stance unchanged. Our current stance of a modest and gradual appreciation path of the $ policy band will help to keep the economy close to potential and ensure medium-term price stability.

Global investments have suffered from weakening business confidence. In Q1 this year, G3 investment growth moderated to 3.4% on a year-on-year basis, from 3.7% last year. In the ASEAN-4 economies, year-on-year growth in fixed investment spending has pulled back sharply, to 3.1% in Q1 this year. This is half the pace seen in 2018. There are three factors driving the current weakness in manufacturing, trade, and investment. a downturn in the global electronics cycle; the lagged effects of deleveraging in China; and the trade conflict between the US and China. 1 / 11  BIS central bankers' speeches  Of the three factors, the trade conflict poses the biggest risk to global growth outcomes. Cycles in electronics production are a common feature and structural trends in digitalisation and the Internet-of-Things should support a recovery eventually in chip production in the next few years. As for deleveraging in China, there has clearly been an easing of the policy stance in recent months in response to the slowing economy. If the trade impasse between the US and China drags on and further tariff measures are imposed, growth in the second half of 2019 is likely to be weaker than earlier envisaged. MAS’ estimates suggest that the direct impact of the tariffs that have been introduced to-date would already shave off a cumulative 0.3% points from global GDP growth over 2019– 2020. The indirect effects on business and consumer sentiments and financial markets are difficult to estimate.
To begin with, it is important to remember that there is generally no contradiction between low and stable inflation and good growth and employment. The whole point of having an inflation target is that it provides the economy with a stability that creates the right conditions for sustainable economic growth. So it is correct that price stability is the overall objective of the Riksbank’s activities. Nor do we have any specific target for production or employment in the same way that we have a specific target for inflation. Does this mean then that we are by definition, and indeed should  BIS Review 2/2008  3  be, “inflation nutters” who only care about the inflation target when deciding on the interest rate? 1 When they drew up the new wording for the 1999 Sveriges Riksbank Act the possibility of the Riksbank having a target for the real side of the economy was also discussed. For various reasons the legislators decided that it would not be appropriate. For example, both earlier experiences and economic theory show that an expansionary monetary policy that fuels inflation will not increase employment or lead to higher growth in the long term. Such a policy has on the contrary had negative consequences for households and companies. So, as monetary policy cannot be used to achieve a lasting higher level of employment or growth in the economy, it would not be appropriate to have specific targets for the real side of the economy.

Annual company accounts, however, are to be recorded in Norwegian kroner and in the Norwegian language unless otherwise provided for by regulation or separate decisions by the Ministry of Finance. The annual report must be written in Norwegian. Under certain circumstances, consolidated accounts may be recorded in a foreign currency. Accounts expressed in a foreign currency may also be published as a supplement to accounts in Norwegian kroner. A third question was whether it should be possible to quote financial instruments traded on the Oslo Stock Exchange in euros and, if so, whether this would require changes in stock exchange legislation. A broadly based committee appointed by the Oslo Stock Exchange has addressed this question. The committee concluded that, although this situation may change, there is little interest in the Norwegian securities market in quotations and settlements in euros. The committee found no legal obstacles to quotations and settlements in euros. Consequently, the Ministry of Finance has not found a basis for recommending changes to stock exchange rules. The Ministry of Finance has also considered whether conversion to euros should be regarded as realisation within the interpretation of tax legislation. The Ministry has concluded that the parties’ positions are not actually altered by conversion. The Ministry therefore maintains that assets and liabilities recorded in the currency of an EMU country cannot be considered as realised after that currency was replaced by the euro.
14  Jonathan D. Ostry, Andrew Berg and Charalambos G. Tsangarides, “Redistribution, Inequality, and Growth,” IMF Staff Discussion Note, SDN/14/02, 2014. 15  Thomas Piketty, Capital in the Twenty-First Century, Belknap Press, 2014. 16  Joseph A. Schumpeter, The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle, Harvard University Press, 1934. See also Philippe Aghion and Peter Howitt, “A Model of Growth Through Creative Destruction,” Econometrica, Vol. 60, No. 2, pp. 323–351, 1992; Katsuhito Iwai, “Schumpeterian Dynamics: An Evolutionary Model of Innovation and Imitation,” Journal of Economic Behavior and Organization, Vol. 5, pp. 159–190, 1984. 17  Hiroshi Nakaso, “Asian Economy: Past, Present, and Future,” Speech at Securities Analysts Association of Japan International Seminar, April 24, 2015. 18  The Wall Street Journal, “Asia Seeks to Reach the ‘Unbanked’,” March 18, 2015. 6  BIS central bankers’ speeches  therefore the prospects for further strong economic growth, will be completely different once the issue of limited availability of banking services is addressed. Conclusion In my presentation today, I have emphasized that productivity growth is crucial to sustaining hitherto robust economic growth in Asia. Among many other things, in my view, the continued accumulation of human capital, market-friendly institutional setups and strong financial sectors, all play an important role in productivity growth. We have seen many positive developments in this respect in Asia, but much more needs to be done. What I have discussed today could be broadly categorized as structural reforms.

Within the tolerance range around its reserves target, a bank has no incentive to pay more than Bank Rate for an additional unit of reserves, or to charge less than Bank Rate for lending an additional unit of reserves, and the demand curve is relatively flat. The length of the flat portion of the curve depends on the size of the tolerance range set by the Bank. If the tolerance range is very small, market interest rates will be relatively sensitive to variations in  6  If the system as a whole already has excess reserves (relative to the commercial banks’ collective target), the Bank can drain reserves by issuing short-term Bank of England bills. BIS central bankers’ speeches  3  the supply of reserves. That is because small variations in supply could potentially move banks into using the deposit or lending facility. If the tolerance range is very wide then banks have little or no incentive to distribute reserves around the market to meet their targets precisely. Alternative frameworks for setting interest rates This system of reserves targets is just one of a number of systems that would be used to implement the policy rate. Indeed, as a system for influencing market rates, these arrangements could be seen as overly complicated. Since March 2009, when the Bank embarked on its asset purchase program known as QE, we have been implementing Bank Rate in a rather simpler fashion. The Bank’s asset purchases were financed by creating additional central bank reserves.
When credit is rationed by banks with large market shares, in regional or national terms, sound investment projects are also postponed. This results in an adverse feedback loop, with banks incurring higher loan losses and weaker earnings – as economic activity stalls. Banks operate with very low levels of equity capital. A manufacturing enterprise or a firm in the service sector should preferably have an equity ratio of between 30 and 70 per cent, depending on the level of risk involved. Banks can operate with a far lower level of equity capital because they are supposed to diversify risk, have sound management systems and be well regulated and under supervision. 6  In Norway, banks’ equity capital makes up six per cent of their assets. Before the Second World War, the ratio was over 10 per cent, falling to five per cent in the postwar period. Government capital injections resulted in a rise in equity capital at the beginning of the 1990s, but the ratio has fallen again in recent years. 6  16  Figures for banks’ equity capital before 1918 are based on: Jan Tore Klovland (2007): “A reconstruction of the balance sheets of savings banks in Norway 1822-1875” and “A reconstruction of the balance sheets of commercial banks in Norway 1848-1900” in Øyvind Eitrheim, Jan Tore Klovland and Jan F. Qvigstad (Ed.) (2007): “Historical Monetary Statistics for Norway – Part II” Norges Bank’s Occasional Papers, No. 38, Oslo. Statistics Norway is the source for figures from 1919 to 1995.

Available here  0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec  Source: DMO and Bank Calculations. Past values adjusted for inflation (April 2020 equivalents). Moment 7: central banking on the home front Table 1 and Chart 15 summarise the scale of the Bank’s recent balance sheet operations: a balance sheet that has expanded by almost a third in three months, and will reach nearly 40% of annual UK GDP by mid-year. To deliver that, we are doing more than ten times the number of weekly operations than in the pre-Covid19 period (Chart 16). This is eye-popping by itself. But, more extraordinary still, virtually all of it has been done remotely – hundreds of billions of pounds worth of operations delivered from peoples’ bedrooms, attics and kitchens, whilst isolated on their own, or caring for children and other relatives. The Bank has long embraced home working as part of its flexible working arrangements – but the sheer scale of what has been done – what we have had to do – would frankly never have been contemplated by choice. Preparation began early – and the 12  All speeches are available online at www.bankofengland.co.uk/news/speeches  12  technology that enables all of our critical operational functions, and the operational and risk controls that go with them, were quickly re-configured to support working from home. By the time of the MPC’s first policy package on 11 March, we were already operating on a fully-live split-site basis.
By contrast, the euro area was more exposed to the energy crisis than the US, given its proximity and higher energy dependence to Russia and especially Russian gas. As long as inflation is largely caused by supply side factors such as energy prices, interest rate hikes cannot address the problem. Hence the ECB reacted when the inflation rate in the projected horizon breached its 2% target and saw signs of infiltration of inflation into demand side factors of the economy. Consequently, the ECB started raising interest rates in July 2022. However, it had started normalising its monetary policy much earlier in 2022 by terminating the PEPP and APP bond purchases. The second main difference relates to the labour market dynamics of the two economies. The US labour market exhibited at a relatively early stage, a greater degree of tightness, evidenced by stronger wage growth in the US than in the euro area. This higher degree of US labour market tightness was another key factor in explaining the medium-term inflationary pressures. By contrast, in the euro area, the pick-up in wage growth is relatively a more recent phenomenon. Characteristically, US labour costs increased by 5.8% in 2022, and almost 12% in the two year period 2020-2022. In the euro area, data until the third quarter of 2022 show that labour costs have increased by 2.8%, with a cumulative growth of 7% over the same period of 2020-2022.

1/4  BIS - Central bankers' speeches  As regards other economic developments specific to the euro area, despite the recent favourable GDP outturns, Russia's unjustified war against Ukraine and its people, continues to act as a headwind to euro area growth. Whilst supply chain bottlenecks are gradually easing and the supply of gas has become more secure, inflationary pressures remain elevated. Specifically, following a peak of headline inflation at 10.6% in October 2022, in February this year it still stands at 8.5%. At the same time, core inflation, which excludes the volatile items of energy and food and therefore captures demand pull forces of inflation, continues on an upward trajectory moving from 5.0% in October 2022 to 5.6% in February this year. In addition, wages continue to grow fast, supported by robust labour markets, with some catch-up to high inflation becoming the main theme in wage negotiations. In this setting of high headline and core inflation, monetary policymakers must ensure that inflation does not become entrenched. Therefore, from an expansionary monetary policy up until the end of 2021, the ECB has moved through the neutral range and continued moving into the restrictive monetary policy interest rate range, currently at 2,5%. At the last ECB Governing Council meeting beginning of February, we reiterated the need to stay the course in raising interest rates at a steady pace and keeping them at restrictive levels to ensure a timely return of inflation to our two per cent medium-term target.
These lie at 75 points above and 75 points below the repo rate respectively. The difference between the lending and deposit rates is sufficiently large for the banks normally to view it as more profitable to balance deficits and surpluses in their payments at the end of the day on the interbank market, rather than utilising the Riksbank's lending and deposit facilities. Both a bank with a surplus and a bank with a deficit win by depositing or borrowing in other banks at rates between the Riksbank's deposit and lending rates. The fact that the interbank rate normally lies at the centre of the corridor, i.e. close to the repo rate is because the Riksbank usually offers the banks the opportunity to borrow or deposit sufficient funds at the repo rate so that no bank will need to utilise the more expensive alternatives offered by the deposit and lending facilities. The condition for this is that the possibilities in the interbank market have been exhausted. Outstanding notes and coins and other items on the Riksbank's balance sheet mean that the banking system currently has to borrow from the Riksbank. To avoid the necessity of converting a large loan stock every day, the Riksbank every week offers the banks the possibility of borrowing via repurchase transactions with a duration of one week at the monetary policy-steered repo rate.

Other mechanisms that in certain situations can reduce the impact of monetary policy from its normal level include the banks tightening their credit standards - known as a credit crunch - because they cannot increase their credit risk exposure, for example, as a result of the capital adequacy rules. 4  BIS Review 80/2001  Following a long period of a strong expansion in credit, based on lenders' expectations of continued growth and high wealth levels, a severe downturn in the economy and falling asset prices can, for instance, lead to the banks limiting their lending due to uncertainty over the quality of their existing loan stock. With hindsight, the banks can conclude that they have probably misjudged credit risks earlier and thus lent money at an interest rate that was too low, as well as failing to reserve sufficient funds to cover future losses. Monetary policy relief can in such situations have less impact than otherwise, as the banks are not prepared to make loans even to profitable investments. To summarise, there is good reason to try to learn more about what affects monetary policy's impact, for instance, via the banks, in different situations. Developments on the financial markets over time and differences between various countries indicate that the impact on demand and inflation of a particular monetary policy measure should differ between periods and between countries.
It has now been raised at six monetary policy meetings in a row, to its current level of 1.75 per cent, and we expect that it will continue to be successively raised to a more normal level. Two conclusions Now, after the financial crisis, I think we can draw two conclusions on our actions in conjunction with the crisis. Firstly, we did not see the crisis coming. As I mentioned previously, we wrote and talked about the Swedish banks’ increasing risk-taking in the Baltic, the rapid rates of increase in  6  BIS central bankers’ speeches  household indebtedness and in housing prices, and the low price of risk. We also wrote about the problems on the US mortgage market. But the crisis hit us from an unexpected direction. We hadn’t expected that the banks would face such comprehensive problems in obtaining funding on the markets. Secondly, the Riksbank reacted quickly and forcefully once the crisis hit Sweden. The comprehensive lending to the banks, combined with the rapid and forceful lowering of the repo rate, contributed to mitigating the impact of the crisis on the Swedish economy. One fortunate circumstance was that lending to the banks is what a central bank is always assumed to be able to do in its role as lender of last resort. The measures we needed to undertake were thus within the framework of our remit.

Not least, the Riksbank’s responsibility for financial stability should be clarified. Secondly, we lack tools to prevent crises, a weakness that is partially connected with the unclear allocation of roles. Although Finansinspektionen has the task of promoting stability and efficiency in the financial system and has tools that can be used to influence the banks’ behaviour, it does not have the explicit task of counteracting macroeconomic risks. At the Riksbank, we have interpreted the present laws relatively broadly to mean that we are to safeguard the stability of the financial system, while, at the same time, we lack effective tools to do this. Thirdly, we need a new regulatory framework specifying how the central government is to handle banks in crisis. Today, banks that cannot pay their debts are declared bankrupt – just like any other company in the same situation. This is often a lengthy process and bank customers may have to wait several years to get their money back. Furthermore, it is not enough for each country to have its own solution. Banks are increasingly working across national borders. The government and Riksdag must also decide whether Sweden should have the same regulations for the financial sector as other countries. Financial crises can lead to very high economic costs and there are a number of risks that are specific to Swedish financial stability, not the least of these being the Swedish banks’ great dependence on obtaining funding on the international capital markets.