samchain/econo-pairs-v1 huggingface dataset:
This showed that the negative interest rate, and our willingness to intervene on the foreign exchange market as necessary, are still essential in order to ease pressure on the franc, thereby stabilising price developments and supporting economic activity. Only in this way can we fulfil our mandate – to ensure price stability while taking due account of economic developments – in the interests of the country as a whole. In September, we also adjusted the basis for calculating the exemption threshold, which defines the portion of a bank’s sight deposits at the SNB on which we do not charge negative interest. This adjustment reduces the overall burden imposed on the banking system by negative interest to the minimum required for monetary policy purposes, 6 while taking account of the possibility that the low interest rate environment may persist worldwide for some time to come. While negative interest rates are unusual and should only be temporary, moderately negative rates are not fundamentally different in terms of their economic effects from interest rates above zero. As the negative interest rate has brought about an easing of financing conditions in the economy, companies are able to take out loans for investments at lower cost. For us, however, this so-called ‘interest rate channel’ is not of prime importance. Rather, it is the effect on the exchange rate that is decisive for Switzerland as a small open economy. With the negative interest rate, we can ensure that the traditional interest rate differential versus other countries is not eroded excessively.

The adjustment problems, after undue optimism among households and firms in the late 1990s had given rise to the imbalances, will lead to the recovery being more sluggish than usual. Some even consider there could be a more drastic correction that breaks a global upswing in the coming years. Those who are more optimistic point instead to the U.S. economy’s productivity growth; if this remains high, there is less cause to be concerned about the imbalances because a higher potential growth rate permits higher incomes with which to service the debt burden. The Riksbank’s current analysis does not envisage a quick correction of the imbalances. Still, there are grounds for supposing that growth in the American economy in the coming years will not be as high as in the late 1990s. And if the imbalances were to be adjusted more quickly, the Riksbank would, of course, have to take that into account in the formation of monetary policy. Turning now to Europe, we see fewer signs of a recovery. The prospects for Germany, the largest economy in the euro area, are still uncertain. However, a look at the leading indicators does show that firms have become more positive. Imbalances like those in the United States have not accumulated in the euro area and this may benefit a recovery. Moreover, economic policy is also markedly expansionary in Europe, although the scope for fiscal measures is not as great as on the other side of the Atlantic.
In the speech we have already quoted, Mario Draghi also insisted upon the need to foster the cooperation of public and private institutions and keep trade open and fair in order to reap the benefits from private innovation: “International cooperation should not be limited to the official sector. Global trade is just as important and much has been said about this. The pandemic has shown us how collaboration between companies is paramount to foster innovation and boost production of essential medical goods.” In a nutshell, the changes required by transition are not only changes in policies within the existing institutional or societal framework. They require us to transform the frameworks themselves. This is very challenging. So is the need to rethink our perception of what abundance is. III. WITHIN BOUNDARIES Some scientists, in particular Johan Rockström and his colleagues,15 have developed the concept of planetary boundaries to refer to nine Earth system processes (including climate‐ and biodiversity‐related processes) that are vital to life on Earth. Human activity is contributing to crossing the boundaries within which these systems can maintain a safe operating space for humanity, and this could have disastrous consequences. This means that the task of our generation is to invent a new model to live (and live well) within these planetary boundaries, or within ecological limits. To be clear, living and thriving within limits is, as such, an immense challenge. 15  Rockström, J. et al. (2009). Planetary Boundaries: Exploring the Safe Operating Space for Humanity. Ecology and Society 14 (2): 32.

6  I would therefore like to elaborate on the relationship between economic growth and ecological limits, as it has profound ramifications, including for central banks. A growing body of literature, including a recent academic paper in Nature Communications,16 suggests that it may be difficult to reconcile an ambitious mitigation of climate change with unlimited economic growth. Professor Dasgupta argues that this tension between economic growth and ecological goals becomes even more evident if we take into account other ecological disruptions than climate change, such as biodiversity loss. In his words, “our economic possibilities are circumscribed […] by the Earth system’s workings”. In order to make progress in the face of such challenges, we must diffuse many of the passionate and intransigent positions that often dominate in public debates. Let me mention two pitfalls we must avoid: ‐  ‐  that it is too late and we are doomed, or that we should stop doing everything we do: travelling, innovating, creating, and so on. Living within limits doesn't mean that we will not keep investing in innovation or that some economic sectors will not keep growing. In fact, some sectors, such as renewable energy, must grow if we are to meet this century’s formidable ecological challenges. that technological innovations and breakthroughs will eventually solve all our problems, and that we will not have to profoundly change the way we live.
The Federal Reserve used a lender-of-last-resort authority it had been granted in the 1930s under Section 13(3) of the Federal Reserve Act to facilitate the transaction. Further, on that Sunday, March 16, the Federal Reserve announced the introduction of the Primary Dealer Credit Facility (PDCF), an emergency extension of the standard discount window facilities to primary dealers. Finally two days later on March 18, the Federal Open Market Committee (FOMC) cut the fed funds target by 75 basis points, bringing the total decrease in the target since the start of the crisis to 300 basis points. At that time, many saw this point as the peak of the crisis and assumed that the weaknesses in the financial and regulatory system would be fixed as the crisis subsided. 2  The Challenge of Central Banking in a Democratic Society. 3  Primary dealers are broker-dealers who trade in government securities directly with the Federal Reserve. BIS Review 81/2010  3  At this point, it is worth spending a moment to explain in a little more detail the basic elements of Section 13(3) of the Federal Reserve Act, a provision that had only previously been used for relatively small loans in the 1930s. 4 Section 13(3) allows a Federal Reserve Bank to lend to any individual, partnership or corporation under the authority of a supermajority of the Federal Reserve Board in unusual and exigent circumstances, if adequate credit accommodations are not available from other banking institutions and if the Federal Reserve Bank is secured to its satisfaction.

Phase 4: Viability of large U.S. banking organizations The next phase of the crisis started in mid-November 2008, as both the stock market and credit default swaps suggested increasing doubts on the part of market participants that large U.S. financial institutions had sufficient capital to withstand the losses that might arise from further deterioration in the real economy. For example, on the weekend before Thanksgiving, the FDIC, Federal Reserve and U.S. Treasury, in response to intense market pressures, came up with a support package for Citigroup, followed by a similar package of support for Bank of America in January 2009. From the public’s perspective, these interventions were becoming harder to understand, and from a policymaker’s perspective, there seemed no end in sight. In the market’s eyes, many banking organizations had become “uninvestable.” Thus, as part of the Financial Stability Plan of the new administration, a comprehensive and forward-looking assessment of the capital needs of 19 bank holding companies with more than $ billion in assets was set in motion. Meanwhile, the Federal Reserve was reacting with great speed to the deepening recession by cutting the fed funds target to its lower bound of close to zero, starting large-scale purchases of agency debt, mortgage-backed securities and treasuries, and introducing a facility to re-invigorate the securitization market. It is important to understand that the objective of the Supervisory Capital Assessment Program (SCAP) – the so-called bank stress tests – was not to assess the solvency of the 19 companies.
This may be a case of still waters running deep – often the most dangerous time on the river. That is why an essential counterpart to our monetary stance is macroprudential vigilance and activism. Nowhere is the need for that more acute than in the housing market. Balance in housing Across the country, house prices have risen by around 10% over the past year, approaching their early 2007 levels. Price inflation has broadened and accelerated across regions. Expectations that prices will continue to rise are now most marked outside London. There have been some signs of a slowdown in activity, with mortgage approvals falling back to their mid-2013 levels. The Bank is watching closely to determine the extent to which this reflects an underlying slowing of housing demand. However, some of this likely stems from lenders adjusting to the Financial Conduct Authority’s (FCA) tough new Mortgage Market Review underwriting requirements. More worryingly, surveys suggest some slowing could reflect would-be sellers holding back properties from the market in anticipation of higher future prices – an early sign of extrapolative price expectations. The underlying dynamic of the housing market reflects a chronic shortage of housing supply, which the Bank of England can’t tackle directly.5 Since we are not able to build a single house, I welcome the Chancellor’s announcement tonight of measures to increase housing supply.

Payments after the COVID crisis – emerging issues and challenges Speech given by Christina Segal-Knowles Executive Director Financial Market Infrastructure Directorate  Webinar: London School of Economics and Centre for Economic Policy Research 11 June 2020  I would like to thank Natalia Dobrovolschi, Rachel James, Cordelia Kafetz, Hardeep Rai, Josh Sadler, Jonathan Wakefield, and Ellen Caswell for their assistance with preparing this speech and Laura Wallis and Stephanie Haffner for their comments and input. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches  Thanks Erik and thanks very much for inviting me to this webinar. I’ll talk through very briefly how payments were changing well before COVID-19 and the impact we’ve seen during the global health crisis. And then I’ll begin to cover what central banks can and are doing in response. Even before the current crisis, people were changing the way they pay. For many if not all of you– the fact that the way we pay has been changing significantly won’t be a surprise. You’ve experienced this. In London, where I live and work, contactless payments have become ubiquitous – from small coffee shops, to farmer’s markets, to stalls at sporting and music events, the need to rush to the cash machine is gone - you can tap your card, phone or watch. We’ve become accustomed to online baskets and clicks; to summoning and paying for services on our phone. People’s behaviour has changed.
The remit recognises that inflation may deviate temporarily from the target on account of shocks, however. Since 2013, the remit has explicitly recognised that in these circumstances, bringing inflation back to target too rapidly could cause volatility in output and employment that is undesirable. The remit requires the MPC to consider, balance and explain such short-run monetary policy trade-offs. Specifically, in exceptional circumstances, “shocks to the economy may be particularly large or the effects of shocks may persist over an extended period or both”. When this is the case, the challenge facing the MPC can be more significant, and the remits directs that “[i]n forming and communicating its judgements, the Committee should promote understanding of the trade-offs inherent in setting monetary policy”, including, importantly “the horizon over which the Committee judges it is appropriate to return inflation to the target”. 2. Achieving price stability A simple framework for thinking about how to manage the monetary policy trade-off is shown in Figure 1. The red line in the figure illustrates a policymaker’s preferred trade-off: mapping the size of the shortfall of output below potential – the output gap – that the policymaker is prepared to tolerate for a given overshoot of inflation from target, and vice versa. The flatter the line the less the weight the policymaker places on output stabilisation and the more they are willing to tolerate large output gaps in order to eliminate small overshoots in inflation.

Over the  16  same period, unemployment averaged 7.6%, with a  14  standard deviation of 2.8%. Soon after the adoption of  12  inflation targeting, unemployment fell by one  10  percentage point and its standard deviation was cut in  8 6  half. The volatility in economic growth rate in the  4  1970s and 1980s was also one-and-a-half times  2 -6  -4  -2  6 8 Output gap (%) Source: Bank calculations. Inflation is the annual growth rate of the retail price index (RPI) until 1975, and the annual growth rate of the retail price index excluding mortgage interest payments (RPIX) after 1975. The output gap is the percentage deviation of quarterly GDP from its trend, where the trend is measured by a Hodrick-Prescott filter. 0  0  2  4  higher than after the adoption of inflation targeting. In sum, high, volatile inflation likely contributed to a higher natural rate of unemployment and poor supply side performance. Once the UK adopted inflation targeting and granted  operational independence to the Bank, consistent with the theory of constrained discretion, the UK moved towards a better equilibrium characterised by low, stable and predictable inflation, and relatively stable employment. Moreover, by successfully anchoring inflation expectations around the target, inflation targeting helped lower UK borrowing costs for households and businesses, and has allowed monetary policy to promote short-run stabilisation of the economy.
The international orientation of the industry has contributed to Switzerland’s success as a financial centre. This orientation also implies that its business is diversified and less dependent on the domestic economy. For example, during the Swiss real estate crisis of the 1990s, profitable international business activity helped to stabilise the banking sector. However, the downside of the international focus is that susceptibility to foreign shocks is considerable. Because foreign business is sizeable, shocks abroad can cause substantial losses for Swiss banks. An example of this are the huge losses some Swiss banks have experienced in recent years due to their US subprime mortgage positions. Where banks have to absorb such losses on their balance sheet, they may encounter refinancing difficulties and be forced to sell assets at any price. This may in turn lead them to cut back their credit supply, and the monetary transmission mechanism may be impaired 4. In the worst case, the financial system could be destabilised, threatening the whole economy. Fortunately the Swiss economy has not suffered a credit crunch – not even in 2008 and 2009. A package of public sector measures greatly contributed to the stabilisation of the Swiss financial system. To sum up, our economy is especially susceptible to financial shocks due both to the size of the Swiss financial industry and its international exposure. As a consequence, a major challenge that arises for Switzerland as a financial centre is to make sure the banking sector is resilient so it can cushion shocks when they occur.

Ladies and gentlemen, there are small risks and big risks. There are risks that affect a single 1/2  BIS central bankers' speeches  bank and risks that affect the entire sector. And then there are risks that stretch across sectors and even countries. In that regard, there is one thing that comes to mind: Brexit. Right now, it is still very unclear how the world will look after the UK has left the EU. Still, banks and supervisors must prepare for any scenario. The worst case would certainly be a “hard Brexit”. In that scenario, the UK would become a “third country” from the viewpoint of the EU. As a result, UK banks might lose their European passport and, with it, access to the Single Market. This would affect many of the 40 UK banking groups that currently operate in the Single Market. They would then have to find another way in. Most likely, they would seek to obtain a banking licence in an EU country to regain the passport. In the euro area, these licences are granted by the ECB. We obviously don’t care whether UK banks move to Frankfurt, Dublin, Paris or some other location in the euro area. What we care about are safe and sound banks. We will therefore resist any supervisory or regulatory race to the bottom. Any bank that moves to the euro area will have to meet our standards – regardless of whether it comes from the UK or any other place.
Since then, the Fed has been able to accommodate ongoing deregulation and respond to shocks in the financial sector by focusing on adjustments in the federal funds rate. More recently, the challenges for the Fed have been on the real side of the economy - and here I’m referring especially to a technology shock. While a technology shock that boosts productivity is a wonderful thing, it also has created uncertainty about the proper course for policy. As I understand it, productivity growth rates have not yet begun to accelerate in Europe. However, it would seem to be only a matter of time before the ECB will face the challenge of responding to a comparable technology shock. In any event, I’d say that our recent experience makes a good case study in conducting monetary policy in the face of great uncertainty - an issue of importance to any central bank. Let me start with a brief look at the history of our experience with financial change. In the late 1970s, the buildup of US inflation pushed nominal interest rates up against the legal interest rate ceilings on most bank deposits. As a result, the market began to circumvent the ceilings by creating new instruments, and pressure began to mount to remove them altogether. In 1980, the Monetary Control Act did just that by phasing out the ceilings. Importantly for monetary policy, the act also permitted banks to pay interest on some checking accounts.

Going forward, we intend to maintain our credibility by continuing to keep inflation under control. 3  BIS Review 82/2000
So far the only specific agreement is to talk to each other. Concrete steps to reduce the scale of global imbalances have, to date, been notable by their absence. Smiling family photographs marking the attendance at international gatherings are no substitute for specific actions. Still, the G20 has laid its reputation on the line. It will be damaged if the framework comes to nought. Looking further ahead, the legitimacy and leadership of the G20 would be enhanced if it were seen as representing views of other countries too. That could be achieved if the G20 were to metamorphose into a Governing Council for the IMF, and at the same time acquire a procedure for voting on decisions. The economic message from the crisis is clear: low-saving countries will reduce their net borrowing from abroad and so will no longer be able to play the role of consumer of last resort. To maintain levels of economic activity, high-saving countries must expand domestic demand and allow their trade surpluses to shrink. This is easier said than done. It will require changes in prices and most obviously in real exchange rates – via either nominal exchange rates or domestic price levels. In themselves, proposals such as the creation of a new reserve currency do not solve the inconsistency puzzle unless they alter the desire of highsaving countries to run imbalances that are too high to last.

Provided monetary growth remains well under control – and remember that at present it is undesirably low – inflation should return to target in the medium term. I hope you will all remember that in both of the past two years inflation picked up as a result of temporary price level factors and then fell back, as the MPC had predicted. So how will 2009 be remembered? As I said at the outset, it is too early to tell. The full impact of the financial crisis has yet to be seen. And the national statisticians will take another two years or so before providing their best estimates of spending and output in the UK economy. More importantly, the question of whether basic reforms to the structure of banking and the international monetary system will be made before another crisis engulfs the world economy remains unanswered. BIS Review 4/2010  5