samchain/econo-pairs-v1 huggingface dataset:
Just as a reference: in March 2014, 90 percent of the analysts consulted under our Economic Expectations Survey thought that GDP would grow by 4 percent or more in 2016. Two years on, 90 percent are betting on less than 2.1 percent. What caused this change in the forecast? To begin with, the world economy is undergoing an important process of reconfiguration, which entails deep changes that have proven not only more intense, but also of a much more persistent nature than expected. Among them, it is worth singling out the evolution of the Chinese economy and its major effects on the commodity markets. The effects of this phenomenon have reflected strongly in a sharp reduction in mining investment, of nearly three points of GDP in the past few years, putting a brake in our economy, especially considering that in previous years this sector was an important driver of growth. The situation in China has not only affected the prices of commodities. In addition, the uncertainty surrounding the changes in the Chinese economy has driven up global risks. After all, never had an emerging economy played such an important role in the world economy. Secondly, the global financial crisis of 2008 hit the developed economies harder than we originally thought. The wounds it left have constrained their economic recovery and pushed them to experiment with ultra-expansionary monetary policies. This, coupled with the fragilities of many emerging economies, has led this group of countries to face tighter financial conditions than they did some quarters ago.

Given these developments, the baseline scenario in this Report assumes that GDP will grow between 1.25 and 2.25 percent in 2016, less than was expected in December, and in 2017 it will grow between 2 and 3 percent (table 2). This implies that the economy will keep growing below its potential for the better part of the forecast horizon, so that a further increase in the output gap is projected. Just for refreshment, let me remind you that in the Monetary Policy Report of September last year we included several boxes that reflected our new estimate for trend growth (i.e. the medium-term growth rate) and potential growth – the non-acceleratinginflation rate of growth. Estimates remain as we communicated then: about 3.5 percent for trend growth and around 3 percent for potential growth. The labor market has been strikingly resilient, with persistently low unemployment rates and strong growth in salaried employment in most of 2015. Most recently, however, the latter has tended to decelerate, which along with other indicators in the same direction suggests that this market could be weakening (figure 4). About inflation, no big changes are foreseen from December. Incoming data confirm that it will gradually converge to 3 percent, after remaining above 4 percent during the first half of 2016. The better behavior of some components not included in the CPIEFE will help speed up this convergence. Thus, by December this year we expect inflation to be at 3.6 percent, two tenths of a point less than what we thought in December.
In other words, same risks same regulation. In the UK, recognising the importance of payments for financial stability, the Bank of England supervises systemic payments systems such as Bacs, the Faster Payments Service, CHAPS, and Visa. And internationally, there are principles – the Principles for Financial Market Infrastructure – which Benoit helped to create when he was at the helm of the Committee for Payments and Market Infrastructure - that govern how payments systems should be regulated and the standards they should meet. These standards form the basis of the BoE’s regulation. 6  All speeches are available online at www.bankofengland.co.uk/news/speeches  6  While same risk, same regulation may seem obvious, in many countries it will require changes to the regulatory framework. Where stablecoins are used in place of money, they need to offer the same protections as money. Problem 2 is how do you ensure the stability of the “thing” being transferred in the payments chain. Existing systemic payment arrangements transfer money that is stable and reliable – in bad times and in good. This generally takes two forms: public central bank money - either reserves held at the central bank or cash; or private commercial bank money – bank deposits. Prudential regulation, access to central bank liquidity, and deposit insurance give holders confidence that underpins their willingness to receive commercial bank money as payment. This gives payment recipients – shops and businesses - confidence that when someone taps their card or phone to pay, the amount promised will arrive in their account.

Improved confidence has also benefited from the changes in certain external conditioning factors, such as those linked to the ECB’s monetary policy and to the progress in economic and monetary union, which have prompted an easing in financing conditions. On top of these are other more transitory effects, such as those linked to the low level of oil prices or to the depreciation of the euro. I shall continue with the analysis contained in the Annual Report, briefly reviewing the key factors behind the recovery. Budgetary consolidation Firstly, regarding public finances, the general government deficit met the objective set by the European Council (5.8% of GDP) for the third year running. In 2014, fiscal policy had a less restrictive impact than in the preceding years and was a less prominent conditioning factor of macroeconomic developments. The reduction in the deficit in 2014 came about as a result of the greater adjustment made at the central and local government levels, since most of the regional governments exceeded the targets set. The budgetary improvement was also the consequence of a similar-sized contribution by revenue and public spending (once the impact of the financial assistance to the banking system is stripped out of spending). The tax take progressively picked up during the year, in step with the cyclical improvement and the change in the composition of GDP.
In particular, a sharp and persistent decline in copper prices originating in real or financial factors would have significant effects on the current account, domestic demand and inflation. The emerging world is facing big challenges in the conduct of economic policies in a scenario that foresees that the strongly expansionary monetary policy of developed economies will continue for a long period. This, because of the possible effects of interest rate differentials between emerging and developed countries on capital flows, asset prices, credit growth and currency behavior. Currency-related tensions may create frictions that may hamper international trade and world growth. The greatest risks have to do with the persistence of highly dynamic domestic demand. On one hand, the economy is already using its internal resources intensively, so if the current expansion of domestic expenditure continues, it could generate, in the medium term, additional pressures on the labor market, the use of installed capacity and inflation. On the other hand, because of its incidence in the behavior of the current account deficit and its potential impact on the vulnerability of the Chilean economy. Any sudden change in external conditions, say, a reduction in the terms of trade or unfavorable financial conditions, could expose the country to costly adjustments. History provides several episodes of this nature.

The major external crises we have faced in the past have been associated with overly rigid exchange rate regimes, which exacerbate credit cycles and mismatches, delay relative-price adjustments and when they finally occur, they have high financial and real costs for the economy. As usual, our baseline scenario reflects those events that are believed to be the most likely with the information at hand at the closing of this Report. There are risk scenarios, however, which if materialized, may reshape the macroeconomic environment – in some cases, significantly – and therefore, may alter the course of monetary policy. On this opportunity, having evaluated the alternative scenarios, the Board estimates that the risk balance is biased upward for output and unbiased for inflation. Internationally, the probability of negative scenarios in the United States have moderated in recent months and in China the threat of a sharp correction in growth has eased. However, the possibility of tensions intensifying in the Eurozone has not receded. The fiscal and financial fragility in this region persists and the ability of policy makers to implement reforms is weakened due to meager growth prospects. The recent episode of Cyprus is a case in point. Italy also deserves special concern, because of the size of its public debt and its weight in the European banking system. New stress episodes in international financial markets could lead to adjustments in the prices of financial assets and commodities, and in global growth prospects.
The use of the buffers may pose difficulties in two instances: for example, if banks fear that reaching certain capital ratios may be penalised on financial markets (the stigma effect); or if there are doubts over their reconstruction in the wake of the crisis, in particular at a time at which banks’ earnings-generating capacity is modest or at which the markets may not be overly receptive. To mitigate this problem, we have made it clear that institutions will have sufficient time to restore compliance with capital requirements and that this process will not start before the main effects of the pandemic have dissipated. In any event, over the coming months we must continue to monitor the use of these capital buffers and assess, where applicable, the adoption of additional buffer-related measures. Based on the experience from this crisis, and looking ahead to the medium term, the balance between structural and cyclical capital buffers could also be analysed as a means of avoiding future difficulties in banks’ effective capital buffer use. Our recent decisions limiting the distribution of dividends by banks should be understood in this very context. Given the persisting uncertainty over the economic impact of the pandemic, as supervisors we have recommended that institutions exercise extreme prudence and consider refraining from distributing cash dividends and conducting share buy-backs, or that they limit such actions until 30 September 2021.

Accounting standard-setters were also explicit concerning the need to take into account the exogenous and, in principle, transitory nature of the crisis when applying the rules, which incorporate the flexibility needed to accommodate this situation. The rapid European reform of capital requirements (informally dubbed the “quick fix”) contributed to these same objectives. Finally, forceful fiscal policy action has helped alleviate the declines in household and corporate incomes. Some of these measures have, precisely, focused either on making it easier for banks to lend, in particular through the public guarantee programmes, or on easing payments arising from their indebtedness through moratoria. The banking sector has played a key role in the application of some of these support measures, smoothing the transmission of monetary policy decisions and the implementation of certain financial and fiscal initiatives, such as the moratoria and public guarantee programmes. As a result of all these measures, and despite the severe economic downturn, the CET1 ratio has increased by 71 basis points (bp) to 13.3%.3 One means of showing the impact of these measures on the sector’s resilience is to calculate their effect on banks’ capital ratios in the stress test exercises mentioned.
1 The change has been stunning. To be fair though, it predates the formation of the MPC by several years; and other countries have experienced a similar, if not so pronounced, improvement in performance. There is considerable agreement that better monetary policy is partly responsible for this better outcome, though there is an ongoing debate about exactly how much was also due to unusually benign global economic conditions, including the impact of globalisation. Whatever the outcome of that debate, we clearly cannot bank on a trouble-free future. But we can and should look hard at the way our current monetary policy framework is operating, to give it the best chance of coping, if necessary, with a harsher climate. So tonight I want to consider what was so special about the MPC; and ten years on, ask how age and success has changed it; and what we can do to preserve its youthful vigour. 2  Historical background  The MPC has come to personify the monetary policy framework that was put in place when Gordon Brown made the Bank of England independent in 1997. But by monetary policy frameworks, I mean the broader set of rules and procedures for taking decisions about interest rates. Prior to 1992, such frameworks often took the form of a commitment to maintain a fixed exchange rate, most recently as a member of the ERM. But these proved hard to sustain – sterling was repeatedly devalued, at great political cost to the Government of the day.

Rachel Lomax: The MPC comes of age Lecture by Ms Rachel Lomax, Deputy Governor of the Bank of England, at De Montfort University, Leicester, 28 February 2007. I am very grateful to Gareth Ramsay for his help in preparing this speech, and also James Proudman, Tony Yates and other Bank colleagues for their help in preparing this speech, and to a number of colleagues at the Bank of England for useful comments. * 1  *  *  Introduction  It’s a great pleasure to be in Leicester tonight, particularly given my long association with De Montfort University, as a Governor. Tonight I want to focus my remarks on the Monetary Policy Committee, which is ten years old this year. This is a blink of an eye in the life of the Old Lady of Threadneedle Street as she approaches 313. But UK monetary policy frameworks have lived dangerously and died young. For them, ten years is good going. To mark the occasion the Treasury Committee has launched a special enquiry. An impressive weight of written evidence has already been published, including a detailed review by the Bank of England. Everyone agrees that the UK has experienced an unprecedented degree of economic stability over the past decade. The average rate of inflation has come down from nearly 10% in the seventies and eighties, to 2.5% since 1993, and the volatility of inflation has fallen very sharply. At the same time, output growth has been higher on average and less volatile.
Swedish house prices were discussed at the most recent monetary policy meeting, where several members emphasised the importance of more closely following developments. Given this, I will now go on to the question of what alternative tools – in addition to the policy rate – might be available to the Riksbank. One problem that has become clear recently is that the impact of the Riksbank’s analyses of financial stability, including warnings of how the risks have developed in the Baltic economies, has been limited. The problem could be a consequence of the distribution of responsibility between the public authorities. The Riksbank currently has a responsibility for the financial system at an overall level, where the focus is on macroeconomic aspects. Finansinspektionen (the Swedish financial supervisory authority) has responsibility for monitoring stability in the individual institutions. However, only Finansinspektionen has the tools to directly influence the financial institutions’ behaviour, for example, the possibility to change capital adequacy requirements and impose sanctions if necessary. There is now a discussion both in Sweden and a number of other countries as to whether this division of roles is optimal from a financial stability perspective. It is easy for a gap to arise between the conclusions drawn by a central bank and the decisions taken by the supervisory authority. Developments over the past year underline the importance of seeing the system as a whole and the systemic risks that might exist in a macroeconomic perspective.

It is thus also in the interest of the central banks to do what they can in various ways to avoid a situation where the economy goes into recession because of a burst bubble. The costs of the most recent financial crisis have been so high that it is difficult to claim that there would not have been any potential gains in preventing the financial bubble from arising. I mentioned at the beginning of my speech that the most recent financial turbulence is the greatest since the Depression and that the downturn in the world economy is the largest since the Second World War. Unemployment in the United States, for instance, has risen from around 4 per cent to more than 10 per cent in just over two years. The percentage of US households experiencing payment problems is the largest ever noted and millions of households have been forced – and probably further millions of households will be forced – to hand over their home to the lender for compulsory sale. In Sweden unemployment has risen much less during the same period, but it is now at just over 8 per cent, the highest level noted for more than 10 years. A further argument in favour of central banks preventing excesses in asset prices is the risk of what is known as moral hazard.
We have been hearing some of this, but more specific examples and solid data is needed to be in a position to address the issues. Remaining issues on my insomnia list Turning now to the issues that still keep me awake at night, I will highlight three of these today: (1) AML/BSA (yet again); (2) information technology; and (3) communication and coordination. 4  BIS central bankers’ speeches  1. AML/BSA  The world of AML/BSA keeps growing. What started out decades ago as a US-centric emphasis on hindering drug trafficking has transformed into a global framework that addresses a range of criminal activity, anti-terrorism, arms proliferation, and tax avoidance. As I know you are aware, the bar keeps rising, as well as the stakes. This past year has seen – again – significant public enforcement actions, some together with huge fines.

At the same time, increasing interest from international investors to diversify a greater proportion of their portfolios to Asian assets has created business opportunities for fund managers based in Asia, including Singapore. The local banks too registered good financial performance last year. Altogether, their profit grew by over 40%. Their return on equity also improved by 2-3% points compared to the year before. At the same time, the local banks have also shown improved financial health. Asset quality has improved further. Classified loans represented 1.6% of total loans in 2006 compared to 2.2% in 2005. The local  BIS Review 74/2007  1  banks remain well capitalized, meeting MAS’ regulatory requirements and in comparison with peer banks internationally. Taken together, these developments bode well for Singapore’s efforts to develop itself as an international financial center. Barring any unforeseen shocks, 2007 looks to be another good year for the financial services sector. Navigating the risks ahead That said I would be remiss if I did not point out some of the risks on the horizon. For now, the global environment appears benign with rosy prospects for growth worldwide. Nevertheless, various uncertainties could quickly unsettle this. For one, it is unclear how the mounting global imbalances between the East Asian countries and the developed countries will resolve. A sharp and abrupt adjustment would affect the global economy. It also remains unclear how long the golden era of good growth coupled with low inflation will continue. Already, fears of inflation have resurfaced.
Instead, the level of debate reflects genuine and unavoidable uncertainty about the economy which was disguised by the stability of rates but never went away. The fact is that we can never be sure we have interpreted the past correctly – there are always alternative plausible interpretations– and we know the future will contain surprises. I want to start today by discussing that range of uncertainty. I will then look at three uncertainties affecting financial markets at the moment: the losses in the US sub prime market, the significance of influential investors including sovereign wealth funds, and the state of the credit cycle. The range of uncertainty The last ten years have become known as the “Great Stability”. Certainly that has been true for the UK. The last quarter was the 60th of uninterrupted positive growth and it was a touch above the average for the last 10 years. On inflation too we saw this month another step back towards target and in 10 years we have only seen one month when the CPI has been more than 1 percentage point away from target (Chart 1). For anyone, like me, who was in the Treasury through the late 70s and 80s, this looks like the promised land; a degree of stability we did not think was attainable.

Dear participants The productivity and the quality of work are major determinants of life quality, affecting nutrition, health and education, social protection, and fair treatment. Jobs are particularly important for the poor, whose labour is often their only asset and a primary route to poverty eradication. It is for this reason, that we at the central bank recognise skills development as an economic imperative. This is because it increases productivity of economic agents. Chairperson In the aftermath of the recent global financial crisis of 2008, employment has re-emerged as a top priority area across the world. A large and growing young population can be a driver for economic growth and social progress provided they access quality education and health, and are engaged in decent employment, without which, many young people will not be able to escape negative social vices and poverty. In recognition, of the foregoing, the National Budget for 2013 whose theme is; “Delivering Inclusive Development and Social Justice” has for the first time put job creation at the centre of its development agenda by explicitly targeting the creation of 200,000 jobs in 2013. BIS central bankers’ speeches  1  Sectors targeted for these jobs are agriculture, tourism, manufacturing and construction (including infrastructure). Ladies and gentlemen Sustained efforts to bring in private investment coupled with supportive public policies and investment, would contribute to enhancing productive capacities and generating the much needed jobs in our country.