samchain/econo-pairs-v1 huggingface dataset:
MONETARY POLICY REPORT PRESENTATION BEFORE THE HONORABLE SENATE OF THE REPUBLIC  Mario Marcel Governor Central Bank of Chile 6 September 2017    The Monetary Policy Report of September 2017 can be downloaded from http://www.bcentral.cl/en. [INF*RES*AS] Introduction Mr. President of the Senate, Senator Andrés Zaldívar, honorable senators, ladies, gentlemen, Thank you for inviting the Board of the Central Bank of Chile to present our September Monetary Policy Report. As is the case every September, its publication coincides with the annual report that, as provided for in the CBC’s Organic Law, we must submit to the Senate. The report I will be summarizing for you now depicts the Board’s vision about the recent macroeconomic and financial developments in Chile and the world, together with prospects and implications for the conduct of monetary policy. It also includes the CBC’s financial results for the first half of the year, plus the results of international reserves management and a summary of the main decisions adopted by the Board this year to date. This presentation will describe two additions to the traditional report, namely an analysis of the determinants of trend GDP in Chile —as a supplement to the Report— and some refinements that the Board has decided to apply to the monetary policy process, summarized in a box alongside the main text.

 The growth potential should be enhanced also by an increase in capital flows and stock, the absorption of EU funds and a better allocation of resources via investment prioritisation.  Achieving convergence is not enough, as convergence should be sustainable, balanced and equitably distributed.  Real convergence should be pursued not only in terms of income, but also in terms of output structure, by means of the level and composition of budget revenues and expenditures. 3   Good European practices should be used to fight tax evasion and strengthen financial discipline.  In the medium run, a balanced primary budget should be ensured and the MTO (medium-term objective) should be again pursued; public debt should be maintained at sustainable levels and inappropriate incentives leading to over-indebtedness of private sector and households should be avoided.  It is necessary to improve the access to financing. 83% of households have 6% of deposits, whereas 0.3% of households hold 25% of deposits. Housing loans have been accessed by only 1% of very low income earners (the 1st quintile) and by only 4% of relatively high income earners (the 4th quintile). 12% of the highest income earners (the 5th quintile) have accessed housing loans.  A roadmap is necessary for joining the euro area.  The public goods that should be preserved and even strengthened include: the country’s security, financial stability, investors’ confidence. European Union – Romania joint agenda for 2019  Conclusion of Brexit negotiations.
Opportunities that not only profit businesses, but that enable private enterprise to help solve real world problems confronting society today – including poverty, climate change and growing inequality. As you can imagine, worrying about risks is in the DNA of central banks given our mandates to promote monetary and financial stability. So the idea of innovative risk management itself would typically set off alarm bells within the Bank, and probably among a number of you in this room. But in reality, we are living in a world where exceptional conditions exist. Monetary and financial 1/5  BIS central bankers' speeches  conditions that prevailed since the Global Financial Crisis have increased financial risks. Thanks to globalisation, regulatory and political developments have a far wider international reach. And social media that has become deeply ingrained in our daily lives has led to a world described in the latest Global Risk Report by the World Economic Forum as “a world without common facts and objective truth”. Innovative risk management is therefore not just about allowing businesses to take on more risks in a responsible way. It is as much about strengthening our defences against new and emerging risks. And perhaps, most importantly, it is about providing businesses with the confidence to move beyond the present to embrace and build a better future. For many organisations, current approaches to risk management are likely to be already severely deficient in this new environment.

That centre must be able to take the relevant fiscal, economic and financial decisions for the euro area as a whole in a swift and transparent manner with full democratic legitimacy and a clear set of responsibilities determined by the legislators. This requires a move from rules-based coordination to sharing of sovereignty within common institutions. One proposal that now needs to be developed further in terms of scope, function, and democratic accountability is a euro area treasury. But – and this is the second important element from the ECB’s perspective – we should also go further with our current policies. It is clear that Europe’s economic and monetary union will need to strengthen its tools to manage and prevent the build-up of fiscal, financial and other macroeconomic risks. Recent reforms include strengthening the framework of economic governance and establishing the European Stability Mechanism, the Single Supervisory Mechanism and the Single Resolution Mechanism. These are important first steps in improving our toolkit for crisis prevention and crisis management, but further progress is needed. In the nearer term, we should move towards completing Europe’s banking union through a common backstop for the Single Resolution Fund as well as a roadmap towards a European deposit insurance scheme. Both are essential for creating a truly single banking system to mirror our single currency. Both are also crucial for underpinning the credibility of the banking union and achieving its initial promise of breaking the bank-sovereign nexus, making the financial system more resilient and protecting taxpayers’ interests.
If the adjustment is too slow, however, it could encourage a return to past behaviour, which led to excessive risk-taking. Today I would like to examine the issues relating to the role of the banking sector in supplying credit flows, in terms of the following three phases: the pre-crisis state of imbalance, the new long-term steady state, and the period of transition leading up to said steady state. 2. The banking system during the credit boom years  As with all system-wide banking crises, the recent turmoil was preceded by strong credit growth, combined with a speculative asset price bubble. 1 This is confirmed by various credit indicators, such as the deviation of the credit-to-GDP ratio from its trend, detrended global credit growth 2, the credit growth gap, and other indicators. 3  1  See C. Borio and P. Lowe, “Securing sustainable price stability: should credit come back from the wilderness?”, BIS Working Paper, No 157, Bank for International Settlements, 2004; C. Borio and M. Drehmann, “Assessing the risk of banking crises – revisited”, BIS Quarterly Review, Bank for International Settlements, 2009. 2  See L. Alessi and C. Detken, “Real time early warning indicators for costly asset price boom/bust cycles: a role for global liquidity”, ECB Working Paper Series, No 1039, 2009. According to these authors, a global credit-to-GDP ratio gap is one of the best indicators (with a lead-time between six quarters and three years) for asset price bubbles that are followed by busts, which prove costly in terms of GDP losses.

Appropriate grandfathering arrangements will be put in place in order to ensure a smooth transition. A further point highlighted by the crisis is the availability of resolution schemes that allow for speedy and decisive interventions in the event of bank failures or near-failures, averting deposit runs and limiting contagion effects on the wider banking system. Several initiatives in this area are under way both at the European and global levels. 14  12  The potential role of capital regulation (Basel II) in amplifying credit cycles is being investigated by a number of authorities and institutions, including the Basel Committee and the ECB. The consultative document issued by the Basel Committee on 17 December 2009 already includes proposals on: (i) mitigating the cyclicality of the minimum requirement; (ii) introducing forward-looking provisioning; (iii) building buffers through capital conservation; and (iv) mitigating excessive credit growth. The latter would imply the introduction of a countercyclical buffer requirement, which would come into effect during periods of excessive credit growth. The Basel Committee’s proposal is currently at an early stage of development and a fully-fledged version will be developed by the Committee in time for its June 2010 meeting. 13  See, for instance, F. Panetta and P. Angelini (coordinators), U. Albertazzi, F. Colomba, W. Cornacchia, A. Di Cesare, A. Pilati, C. Salleo and G. Santini, “Financial sector pro-cyclicality – lessons from the crisis”, Questioni di Economia e Finanza, No 44, Banca d’Italia, 2009.
This enables them to borrow larger amounts, which in turn leads to a further increase in asset prices. Second, credit risk from the lender’s perspective falls with rising asset prices. During such periods, banks therefore tend to offer more loans and at more favourable rates. Developments in Switzerland in the 1980s illustrate these aspects clearly. From 1983, the Swiss economy recorded dynamic growth over several years. This upturn was temporarily challenged by the slump on the global stock markets in autumn 1987. 15 Global central banks, including the SNB, reacted with a significant loosening of monetary policy that had a rapid stabilising effect. The economic upturn in Switzerland gained further momentum over the following quarters. The overall macroeconomic environment was therefore favourable. Real estate prices in this environment rose at an increasing pace between 1985 and 1990. The volume of outstanding mortgage loans also climbed sharply. Systemic risks  Back to the theory and to the second factor for excesses on the credit market. The previously described reactions of individual lenders or individual banks to the favourable environment contribute to the build-up of systemic risks (cf. slide 11). This means that from the individual’s perspective, the expansion in credit demand and supply in a favourable environment may well make perfect sense. But, even if all parties behave rationally from their own point of view, there is still the risk that overall an excessive level of debt will build up that is unsustainable in the long term. Why is this?

In his report submitted to the Government on establishment of the Central Bank, he stated as follows. I quote “the broad powers given to the Central Bank of Ceylon under the draft bill in Part II of this report are commensurate with the magnitude of this responsibility. The Bank should not be hampered by rigid limitations which might prevent it from fulfilling its purpose. When a new central bank is being established it is impossible to predict the course of its development. This will depend upon the environment within which it works and upon those who, determine its policies. Many of its powers may go unused for long periods, because they are designed for particular situations, some of which may never arise. Others are intended for use only in crises or to forestall a crisis, but prudence dictates that they be included now, so that they will be at hand in case of need. It would be foolhardy to assume, with the record of the war – and depression – induced economic crises of the last 30 years plainly before us, that the Ceylon economy will somehow escape such crises in the future. The safer assumption is the one underlying the drafting of the present bill: it is better in an uncertain economic world to be prepared for any eventuality. Many features of the draft bill have been developed in the Western Hemisphere. Others are found in one form or another in central banking legislation within the Commonwealth.
It is important to learn the lessons from all of our experiences, both good and bad, to help us better shape the future regulation and supervision of the financial system. And it is with this in mind that I want to comment on our experience with global banks headquartered in Spain. As I will stress throughout my intervention, the global nature of systemically important banks should not be seen as a negative attribute. Globalization allows countries and cultures to learn from each others’ experiences, enriching us in a very broad sense. Of course we want a safer world, but a key foundation of safety is a world that is able to grow. And growth goes hand-in-hand with openness and globalization. In fact, globalization has been the engine of growth in the years before the crisis. And global banks have played a key role in this process and, therefore, in delivering growth to our societies. Some banks have become global because they have accompanied domestic non-financial companies in their international expansion process. BIS central bankers’ speeches  1  Our largest global banks became international around fifteen years ago. They went first to Latin America, following their large domestic customers (utilities, oil companies, telecom firms, construction and technology firms and so on) into those new markets. Once in the new markets, the banks were able to familiarize themselves with the needs of other local customers and started to provide banking services to local households and firms.

François Villeroy de Galhau: New Year wishes 2023 New Year wishes to the Paris financial centre by Mr François Villeroy de Galhau, Governor of the Bank of France and Chairman of the Autorité de contrôle prudentiel et de resolution (ACPR), Paris, 5 January 2023. *** Allow me to extend my warmest wishes for 2023 on behalf of the Banque de France and the ACPR. I don't know if I dare wish you, or wish us, a year free of shocks after those of 2020, 2021 and 2022. This past year has been marked by a climate of uncertainty, exacerbated by Russia's war in Ukraine and the energy crisis. It has also seen increased financial market volatility, compounded by the turmoil in the cryptoasset universe. In this unstable environment, I would like to make two double wishes for 2023: 1) Less inflation and more stabilisation. Activity has, until now, proved more resilient than expected, which is good news; however, inflation must not become entrenched. It is the number one concern for French people, and defeating it is our number one mission. It fell in December to 6.7%, which is encouraging but still not enough. It should peak in the first half, before declining towards 4% by the end of this year. But our forecast, and our commitment, is that inflation should be brought down towards 2% by end-2024 to end-2025.
At the outset, the fan charts published in the Inflation Report showed that the odds on writing such a letter during the following two years were 3 to 1 on. In the event, no letter was required. Although the probability of writing such a letter has diminished, it remains high. The latest Inflation Report published last Wednesday implies that the odds on our having to write a letter over the next two years are 2 to 1 against, or one in three. Thirty years ago the UK embarked on an inflationary journey, and what a roller coaster ride it turned out to be. During the 1970s inflation averaged no less than 13% a year, with a peak of over 27% in August 1975. During the 1980s inflation averaged 7% a year, and it has fallen to 4% during the 1990s. That period also contained two of the deepest recessions experienced by any major industrial country in the post-war period. Since the inflation target was adopted in October 1992 inflation has averaged 2.8%. The improvement in inflation performance during the 1990s can be seen in Chart 1.1 Inflation has been remarkably stable during the six years since an inflation target was introduced. Indeed, it has been more stable than in any period since monthly RPI figures were first collected in 1947. 1  Charts not included in this Review. BIS Review 63/1999  2  Moreover, the adoption of a monetary regime which produced low and stable inflation has not damaged growth in output and employment.

Since the end of 1992 output has grown at an average annual rate of 2.8%, well above the post-war average. More significantly, growth was more stable, with a standard deviation less than one-half that of output growth in earlier post-war decades. And unemployment, as measured by the Labour Force Survey, has fallen from 10.7% at its peak in 1993 to a current level of 6.3%. So since the inflation target was adopted inflation has been lower, and growth as high, as in any post-war decade, and both have been more stable. And total output in the economy has now increased for 27 consecutive quarters, the longest period of uninterrupted growth since the Second World War. Part of the credit for this improvement in UK macroeconomic performance belongs to the policy framework (both pre- and post-MPC), and part was the result of favourable economic circumstances. From 1992 to 1996, the ability to grow at above trend rates without an increase in inflationary pressure was made possible by using up the margin of spare capacity created by the deep recession of the early 1990s. After 1996, inflationary pressures were contained by lower commodity and other world prices, and the impact of a sharp appreciation of sterling. These developments have had a significant impact on inflation. And they were largely unpredicted. So, although monetary policy has faced some difficult choices over the past two years, it has benefited from an unexpected downward movement in imported inflation. These external influences have offset a much higher level of domestically generated inflation.
To enable the banks to restore the situation to more normal conditions, the Riksbank has offered financing at longer terms than what the markets can currently provide by lending Swedish krona with maturities of three and six months. The lending is designed so that we provide liquidity in the form of somewhat longer loans and absorb the same quantity of short term liquidity. Combined with the fact that lending takes place at market rates, this means that banks receive help with their strained financing situation at the same time that the measures do not have any direct effects on monetary policy. This is a very important point. The Riksbank is quite simply helping the banks replace their short-term financing with longer-term financing. In a broader sense, the Riksbank is assuming the role of market maker in the money market and by doing so ensuring its functioning. The other problem is that a general shortage of financing opportunities in US dollars has arisen. Since the Swedish banks are not counterparties with the US central bank, they cannot be certain that they will receive any of the injections of liquidity that the Federal Reserve makes. That is why the Riksbank have offered their counterparties large loans in US dollars.

Even if we supplied the correct aggregate quantity of reserve balances, individual depository institutions with a deficiency of reserves had to find and trade with depository institutions with reserve surpluses. A purchase of fed funds therefore represented the marginal source of funding for a bank, and the fed funds rate paid by the bank was the marginal cost of bank funding. The Desk’s daily fine-tuning operations represented a marginal adjustment to the aggregate supply of reserves, mostly in response to the exogenous impact of changes in other balance sheet items, such as Federal Reserve notes and the level of the U.S. Treasury’s account balance at the Fed, which altered the level of aggregate reserves in the banking system. In the five years prior to the crisis, this system functioned with an average of $ billion in reserve balances and about $ billion in excess reserves. Although aspects of this approach evolved over time, this general method for implementing monetary policy was employed by the Desk for decades, and the Desk’s ability to reliably achieve the FOMC’s policy directive was judged quite favorably by market participants. In fact, with increased transparency around the FOMC’s fed funds target (which the Committee began to officially announce in the mid-1990s) and with high confidence in the Desk’s ability to hit that target, markets often adjusted to announced changes in the FOMC’s target policy rate without the need for the Desk to conduct operations to effect the change.
More important for financial market asset prices than the precise timing of lift-off is the expected trajectory of short-term rates over the next few years following lift-off. Most likely, this will be a shallow, upward path. Because of the persistent headwinds associated with the recent financial crisis, the level of real short-term interest rates consistent with a neutral monetary policy seems considerably lower now than in the past. And, if potential GDP growth is much lower – due to slower labor force growth and productivity growth – the long-run equilibrium real short-term rate is also likely to remain lower than normal in the future even after those headwinds fully dissipate. But there must be considerable uncertainty about the path for short-term interest rates. After all, the economic outlook is uncertain. Moreover, the appropriate stance of monetary policy will be influenced by how financial market conditions respond to the Federal Reserve’s actions. All else equal, if financial conditions tighten sharply, then we are likely to proceed more slowly. In contrast, if financial conditions were not to tighten at all or only very little, then BIS central bankers’ speeches  1  – assuming the economic outlook hadn’t changed significantly – we would likely have to move more quickly. In the end, we will adjust the policy stance to support the financial market conditions that we deem are most consistent with our employment and inflation objectives.

This combination of slow output growth and continued job gains has meant that productivity growth has been unusually weak, with non-farm business productivity declining significantly during the past two quarters and rising by only 0.3 percent over the past year. It also implies that the future path of productivity growth will be important in determining the outlook for employment growth and the prospects for further progress in U.S. labor market conditions. Because it is unclear exactly why productivity growth has slowed recently, it is difficult to be confident about what it will do in the future. One reading of the data is that some of the slowing seems likely to be persistent. For instance, the weakness in capital spending evident during much of this economic expansion means that the contribution to productivity from capital deepening has dropped sharply in recent years. 2 Also, the U.S. labor market appears to have become less dynamic – perhaps due, in part, to an older workforce. Less movement of workers across jobs could lead to a less efficient allocation of workers’ skills, which would hurt productivity growth. That said, it seems unlikely that productivity growth will remain as weak as it has been over the past year. There is considerable evidence that technological progress continues at a healthy pace. Just look at the advances that have occurred in health care, oil and gas extraction and the development of smartphones.