samchain/econo-pairs-v1 huggingface dataset:
INFLATION DRIVEN BY BOTH SUPPLY AND DEMAND FACTORS  We are seeing a surge in inflation globally because a robust demand recovery postCOVID has run into supply-side frictions and, more recently, war-related disruptions. Even before Russia attacked Ukraine, inflation was beginning to rise. The global economy, in aggregate, had recovered its COVID-induced losses by Q1 of last year. Inflation readings in the advanced economies began to run ahead of forecasts during H2 2021. The post-pandemic rebound in demand, on the back of substantial fiscal and monetary policy stimulus, was stronger than expected. The key source of inflation pressures now in most advanced economies is labour market tightness. There has been a marked increase in the demand for labour, against a decline in labour force participation that occurred during the pandemic and has not recovered fully. Wage increases have exceeded productivity gains, fuelling price pressures. Globally, economic growth is slowing but remains intact. Rising inflation has no doubt dented business and consumer confidence, but not yet to a degree that would lead to a severe downturn this year. In the US, pent-up consumption demand remains resilient, on the back of strong employment and wage growth, and strong household balance sheets offering some buffer against the squeeze on real incomes from higher prices. In Europe, while higher utility costs are exerting a significant strain on households and firms, savings accumulated over the past few years will buffer consumption.

The appreciation of the Singapore Dollar led to a negative foreign exchange translation effect of $ billion. The Singapore Dollar strengthened 4% against the Pound Sterling, 5% against the Euro, and 9% against the Japanese Yen. Total expenditure increased to $ billion, due mainly to higher interest expenses on domestic money market operations. CONCLUSION In conclusion, let me return to where I started – inflation. The current bout of inflation will eventually end. Question is: how long will it take and how much will the economy have to slow down. Taming inflation is like trying to slow down a speeding car on a gentle slope. It takes a combination of forcefulness and calibration. If you do not depress the brakes early enough or hard enough, you cannot break the speed momentum – likewise, monetary policy needs to act early and decisively. But if you jam the brakes too hard, the car may skid or even topple over – the economy may go into a recession. So you have to pump the brakes progressively, to gradually slow down the car to a more sustainable cruising speed. This is why central banks all over the world tighten monetary policy in a series of well calibrated steps and closely monitor the impact of their actions before deciding on the next step. And that is exactly what MAS too is doing. Which is why we are not going to say anything about what we might or might not do in October!
François Villeroy de Galhau: Card payments in Europe – latest trends and challenges Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Bank of France conference “Card payments in Europe – latest trends and challenges”, Paris, 18 January 2016. *  *  *  Ladies and gentlemen, Dear Yves Mersch, Dear Mario Nava, First and foremost, on behalf of Banque de France, I would like to warmly welcome you all in Paris. I am delighted to open this conference dedicated to card payments in Europe. A large number of European actors involved in the card payments market are represented today, including regulatory authorities and market players, and I have no doubt that the debates that are going to take place will give us a valuable insight on the latest trends and the challenges they bring with them. Before leaving the floor to our speakers and panelists, I would simply like to share with you a few thoughts on two of those challenges, one addressed to the supply side of the card payments market and one to the regulatory community. I. First challenge: the sustainability of the dominance gained by cards as payment instruments. Will the most used payment instrument in Europe continue to rise or will it fall? Over the last decade, payment cards have steadily consolidated their dominance as the most used non-cash payment instruments in France and Europe.

There are numerous historical examples, both known and unknown to the public, of these account relationships being used to support the stability of the global financial system, perhaps best exemplified historically by the Bretton Woods network of central bank swap lines.14 More recently, in nearly every major international incident over the past twenty years that has prompted a coordinated response by the world’s major central banks—be it coordinated FX interventions by the major central banks in the wake of the 2011 Fukushima disaster, the swap lines established during the 2008 financial crisis, or swap lines in the wake of 9/11—the reciprocal accounts among major central banks formed the backbone for the actual or potential execution of stabilization policies. Without these 3/8  BIS central bankers' speeches  accounts, coordinated central bank action in pursuit of financial stability objectives would be either severely handicapped or entail high risks in terms of the safety, confidentiality, and reliability of these operations.15 The practical reality is that in exigent situations characterized by fast-moving events, incomplete information, and intense pressure, even the best of policies can fall short unless a level of trust, experience, and internal muscle memory exists for operations to be executed effectively. Operational readiness is developed and conditioned through the daily interactions between central bank staffs in the course of managing each other’s cash and custody accounts, generating valuable in-house expertise in cross-border central banking operations and a network of inter-personal and institutional relationships in the global central banking community that may otherwise not exist.
Second, it is difficult because the evaluation must extend to entities and activities that operate outside of the more tightly regulated core – including, of course, the so-called “shadow banking system.” In the U.S., some of this responsibility undoubtedly falls to the Financial Stability Oversight Council,  BIS central bankers’ speeches  7  which was created by the Dodd-Frank Act. But this is a relatively new institutional arrangement and how well it will be able to perform its mission in practice remains to be determined. Similarly, on an international basis, the Financial Stability Board has undertaken an initiative to evaluate risks within the shadow banking system, but this effort is also still in a fledging stage. Finally, turning to the last issue about how to deal with institutions that run into difficulty, there has been progress. In the United States, the Dodd-Frank Act (DFA) gave the FDIC the authority to resolve certain large systemically important financial firms, on the recommendation of the Federal Reserve and the FDIC, and after the Treasury Secretary makes certain determinations in consultation with the President. Among other things, DFA enables the FDIC to establish a bridge institution in which critical activities could be moved so that the failure of a major institution will not unduly disrupt the provision of key financial services. DFA also authorizes the Federal Reserve to require that such institutions develop recovery and resolution plans – plans that must be acceptable to the Federal Reserve and the FDIC.

Margarita Delgado: Role of the financial sphere in accelerating decarbonisation Speech by Ms Margarita Delgado, Deputy Governor of the Bank of Spain, at an event jointly organised by the Bank of Spain, the World Wide Fund for Nature, the Ministry for the Economy and the Ministry for the Ecological Transition and the Demographic Challenge, 3 December 2020. * * * Good morning, and thank you all for being here, whether in person or online, attending this event jointly organised by the Banco de España, the World Wide Fund for Nature, the Ministry for the Economy and the Ministry for the Ecological Transition and the Demographic Challenge, which aims to boost the role of the financial sphere in the process of decarbonisation. The transformation of our economy into a more sustainable model is an unavoidable necessity to which we have committed ourselves as a society and which we have agreed with our European partners. The draft climate change law includes a set of measures that essentially impact what we call the real economy. There are references to the role of the financial sector in just a couple of its articles. A priori, that would seem natural and logical. Evidently, the CO2 reduction targets directly affect energy production, transport, mining and industrial processes in general. But anybody might well consider that the effects on the services sector or, of course, the banking industry should not be so significant.
If the effects of these policies are large enough to alter or distort the relationship between asset prices and the underlying fundamentals in our economies, and this seems likely to be the case, then we can take less comfort from traditional relationships between those variables. The fact that official purchases of financial assets are driven by different factors than those driving private investors suggests that we would probably see a somewhat different combination of capital flows, exchange rates and interest rates in the absence of official intervention. This makes the task of assessing the probable trajectory of growth and inflation more complicated. It makes it harder to assess the likely evolution in financial conditions and asset prices. And it makes it harder to assess the effects of the present stance of monetary policy on aggregate demand and inflation. To the extent that these forces act to raise asset prices, lower interest rates and reduce risk premia, it is harder for the markets to assess how much of the very favorable conditions are likely to reflect fundamentals and prove more durable. This can contribute to an increased willingness to raise leverage in the investment community and to take on more exposure to risk.

And it seems somewhat inconsistent with the rise in equity and other asset prices, the fall in credit risk premia, and the relatively low levels of uncertainty about the future reflected in measures of expected future volatility in many different types of financial instruments. One feature of present conditions that is not captured by these explanations and that is likely to be playing a significant role in contributing to the combination of these large imbalances and relatively low forward interest rates is the pattern of exchange rate and monetary policy arrangements in the global economy today. Even with the broad shift globally to more flexible exchange rates, a substantial part of the world economy now run monetary policy regimes targeted at limiting the variability in their exchange rate against the dollar, or a basket in which the dollar plays a substantial role. Sustaining that objective in the past several years has required a large accumulation of dollar assets. The scale of this activity has been particularly dramatic in parts of Asia. The significant rise in the earnings of the energy exporters, many of whom also run exchange rate regimes that seek to shadow the dollar, has also generated a substantial rise in investments in U.S. assets. A large share of the capital flows to the United States that have financed our current account imbalance come from these official sources. These flows add to other sources of private demand for U.S. assets.
Tightening monetary policy after a long period of very low rates has the potential to reveal further financial vulnerabilities. We need to consider how declining asset and collateral values flow through the system, including potential risks that may arise as leverage is unwound. But having built up resilience in the system ahead of time should prove a smart investment. Reforms since the GFC mean that the core of the financial system, especially banks, is much safer. And so far banks and insurers have shown themselves to be resilient, notwithstanding the sharp increase in interest rates. The same can be said of households and businesses. Rising rates will affect house prices, but the FPC has helped to limit risks from household debt through our mortgage market tools. And by stress testing banks against major increases in corporate defaults we have reduced the risk of the banking system amplifying distress in the corporate sector. In fact we have been including ‘rates up’ scenarios in our stress tests for many years, giving us a forward-looking view of the system’s resilience to increases in interest rates and so the ability to build extra resilience in advance of higher rates materialising. All of this means that while the FPC stays on the case for financial stability, the MPC can get on with its job of ensuring monetary stability. Of course the LDI episode highlights the need for vigilance. This is particularly true for marketbased finance – financial institutions outside the banking system.

Possible explanations: risk premia Another vantage point can be gained from decomposing changes in the level of the equity market into changes in (estimates of) the risk-free rate, projected earnings growth, and the equity risk premium8. For both the FTSE100 and the S&P, this suggests that the decline in real rates has been an important driver of the rise in the equity market since the early 1990s, but that the market is not materially more sensitive to changes in real rates now than it was on average over the past 15-20 years (Chart 2). This may be because, as part of better monetary policy regimes, risk-free real rates have been slightly less  5  See Woodford, M., 2003, ‘Interest and Prices: Foundations of a Theory of Monetary Policy’, Princeton University Press, Chapter 7; Tucker P M W (2006), ‘Reflections on operating inflation targeting’, speech at the Chicago Graduate School of Business, May 2005, Bank of England Quarterly Bulletin Summer 2006, page 217. 6  Rogoff, K. (2006), 'Impact of Globalization on Monetary Policy, paper prepared for a symposium on 'The New Economic Geography: Effects and Policy Implications', Jackson Hole Wyoming August 2006. 7  As for the volatility in individual-firm equity returns, some extreme episodes aside (for example, the 1987 Crash), the firmspecific component inevitably dominates. For the UK market, the common component seems to have fallen slightly, on average, since 1992. The idiosyncratic component rose during the second half of the 1990s, but then fell back.
It also means the macroprudential authority has no framework and tools for loosening regulatory policy to prevent the self-reinforcing deleveraging spirals that kick in in the downturn of the cycle. Second, it is difficult to know ex ante how strong the next credit cycle is going to be and so where to set underlying policy. The FPC faced some of these issues in the design of the UK’s “leverage ratio” capital framework which the Committee agreed last year. Our conclusion, informed by an assessment of the economic costs and benefits, was that provided we had the ability to vary leveragerelated capital requirements countercyclically, in the same way that we could vary the riskweighted capital requirements, we could set the minimum leverage requirement at a lower point. The second approach is to try to maintain the overall resilience of the system over the cycle. The underlying regulatory framework is of course intended to cope with a wide range of risks. It is intended to keep such risks firmly located in the tail of the distribution. But the distribution  BIS central bankers’ speeches  5  of risks changes through the cycle. One approach to time-varying macroprudential policy is to aim to ensure that tail risks do not increase with the credit cycle – ie that the resilience of the system is maintained over time and does not change with the distribution of risks. Stress testing of banks can play an important part in making an assessment of resilience through the cycle.

The guidelines are based on the above-specified supervisory bodies’ considered opinion that there is no legal or substantive rationale for the maintenance of the previous interest rates (which were determined with reference to foreign interbank rates) after the portion of loan principal bearing such interest has been uncoupled from the exchange rate of the currency concerned by means of the recent Supreme Court decision. The supervisory bodies are of the opinion that such an interpretation of the Supreme Court judgement, were it implemented to the fullest extent possible, would represent such a heavy blow to financial undertakings’ equity that the Treasury would be forced to contribute substantial new capital to them. That expense would ultimately be borne by other members of society. The method recommended by the Central Bank and the Financial Supervisory Authority will preserve the stability of the financial system even in the event that a majority of loan agreements with exchange rate linkage clauses are deemed unlawful, although it could take quite a long time to determine this conclusively. Financial undertakings’ equity will sustain a considerable blow in any case, if judgements by the Supreme Court ultimately extend to a large portion of their loan portfolios. Offsetting this is the fact that uncertainty will have been eliminated, which could provide an opportunity to re-evaluate economic capital at a later time. The financial system should therefore remain sound. Many borrowers with foreign-denominated loans are in an extremely difficult position. Their anger and disappointment are understandable.
We can see that these restructured loans, coupled with the safety cushion accumulated over previous periods, help protect the banking system and prevent a situation where last year’s crisis could turn into a problem for the financial system in the future. We believe that loan restructuring has already passed its peak. Since the outbreak of the pandemic, banks have restructured approximately 10% of their loan portfolio, which is quite a considerable amount. As estimated by banks themselves, up to one-third of these restructured loans may turn into non-performing ones. Banks consider that this figure may reach 20– 30%. This would imply that non-performing loans could make 2–3% of the entire loan portfolio, 1/7  BIS central bankers' speeches  and banks would need additional provisioning for them. We do not consider that this could entail any systemic risks since loss recognition would be gradual. Judging by the previous crisis period, this process takes about two years, that is, provisions will not be created immediately in any case. Most banks have sufficient revenues to form provisions without the need to use their capital. The sector also has a significant capital cushion maintaining it at six trillion rubles, which is three times more than the potential amount of additional provisions for restructured loans. In other words, we can see no problems in this respect for the banking system as a whole. There is also an unevenness in terms of both capital and income distribution and the process how nonperforming loans will be recognised in banks’ balance sheets.

The reason is that the inflation target, which is governed by regulation in pursuance of other provisions of the Act, provides the central bank with a suitable mandate. The central bank is no longer a limited liability company as it was until 1985, but a separate legal entity owned by the state. The central bank shall submit matters of special importance to the Ministry of Finance before making a decision. Although this submission arrangement gives the Ministry of Finance an opportunity to state its views, and obliges Norges Bank to consider them, it does not relieve Norges Bank of the full responsibility for its decisions. The text of the Act does not specify which matters are not only important, but of special importance. The preparatory works of the Act provide little guidance today. When the Act was under preparation, the interest rate was not a policy instrument, but had the nature of being an end in itself. It was rarely changed, and then only in critical situations for the Norwegian economy. In the period of exchange rate management in the 1990s, changes in the key rate were also linked to large currency inflows or outflows that might indicate substantial imbalances in our economy. In the past 10–12 years this has changed completely. Norges Bank operates a target set by the government authorities, and interest rate changes are nearly always small and rarely come as a surprise to economic agents.
Since the 1970s, capital injections to the banking system have averaged around 8% of GDP at crisis time. 12 Taken together, this evidence paints a consistent picture: a progressive rise in banking risk and an accompanying widening and deepening of the state safety net. There is a ratchet. This ratchet is evidence of a policy time-consistency problem. 3. Time-consistency and the banking safety net  What explains this time-inconsistency? A simple framework is developed to explain the existence of, and ratchet in, the safety net. It focuses on the incentive structures facing owners of banks and the risk strategies they pursue. The run-up to the present crisis provides several examples of those incentives and strategies at work. Take the payoff profile facing a bank shareholder. Assume that the sensitivity of the bank’s assets to aggregate risk – in the language of finance, its beta – equals 0.1. So for every 10% movement in the market as a whole, the bank’s assets move by 1%. Assume too that the beta of the bank’s deposits is zero and that the bank has an equity capital ratio of 10%. While arbitrary, these numbers are broadly plausible. Conveniently, under those assumptions the  10  Laeven and Valencia (2009). 11  Logan (2000). 12  Laeven and Valencia (op.cit.). 4  BIS Review 139/2009  beta of the bank’s equity equals one. Figure 1 shows the payoff profile facing owners of the bank. The return on a bank’s equity lies on a 45 degree line when market returns are positive.

Among state banks in the US during the 19th and early 20th centuries, double liability is believed to have helped constrain risk-taking. 17 This practice was ended at the time of the Great Depression in the US. Given the likely need to rebuild bank equity in the future, now may not be the time to return to unlimited liability. Fortunately, there are two alternative approaches to adapting capital structure which alter the balance of risk-taking incentives, without jeopardising the flow of risk capital. Both involve operating not on equity, but on debt. And both involve making debt, like equity, a more loss-absorbing instrument in stress events. First, contingent capital is a means of automatically converting debt instruments into equity in the event of a capital top-up being needed. The capital structure of banks  16  Caprio and Honohan (2008). 17  Grossman (2001). 8  BIS Review 139/2009  thereby becomes more malleable. There has been recent interest in contingent capital instruments as a means of providing banks with an extra degree of freedom in stress situations. 18 The benefits in principle seem clear. The difficulties in practice include whether there is likely to be sufficient investor demand for such hybrid instruments. Second, wholesale debt instruments at present rank equally with retail deposits in the UK in the event of a wind-up. In the US, depositor preference has operated nationally since 1993, with retail deposits ranking ahead of wholesale debt.