samchain/econo-pairs-v1 huggingface dataset:
The second question, about your targets. According to projections you do not expect to reach the inflation target in the next three years. Some economists suggest that this target  6/10  BIS - Central bankers' speeches  is no longer valid, that 3% will be the new 2%. What do you have to say about that? We have a target. We have agreed on the target. We are in the middle of that fight against inflation and this is what we know. We're going to get to that 2% and we're going to reduce it to 2%. What happens next is another story, but we want to be at target and we want to be confident that it remains at target. So, the two elements are going to really drive our monetary policy going forward. On the lag time: we know that there is lag time, that the decisions that we have made in the last soon-to-be-a-year – which are monumental, by all accounts, both in terms of speed, in terms of height, volume of hikes, if you will, and we are seeing some effects. We are seeing it in market rates. We are seeing it in banking, financing. We are seeing it in credit, both in volumes and in rates. There is some lag time – not that much by textbook standards, which will typically say that it's anywhere between 18 and 24 months, maybe a bit more.

Mario Draghi: Hearing at the Committee on Economic and Monetary Affairs of the European Parliament Introductory statement by Mr Mario Draghi, President of the European Central Bank, at a hearing before the Committee on Economic and Monetary Affairs of the European Parliament, Brussels, 19 December 2011. *  *  *  Dear Madam Chair, Dear Honourable Members, È per me un estremo piacere partecipare per la prima volta come Presidente della Banca Centrale Europea a questa riunione. Il dialogo monetario trimestrale con l’ECON rappresenta un’opportunità fondamentale e la pietra angolare per un rapporto costruttivo tra le nostre due istituzioni. Cet échange a lieu quelques semaines seulement après que d’importantes décisions ont été prises à la fois par le Conseil des Gouverneurs de la BCE et par les Chefs d’Etats et de Gouvernements. Dans ce contexte, notre discussion promet d’être particulièrement riche et fructueuse. Zur Einführung werde ich zunächst auf die aktuellen wirtschaftlichen Entwicklungen im Eurogebiet eingehen. Anschließend werde ich mich den von Ihnen gewünschten Themen zuwenden, nämlich dem Instrumentarium zur Krisenbewältigung einerseits, sowie den Rating-Agenturen andererseits. I. Economic and monetary developments  Since the last regular hearing in October with former President Trichet, the ECB has taken a number of steps to ensure that it will continue to deliver price stability in the medium term in an environment that remains challenging. These steps relate both to changes in our interest rates and to non-standard measures.
–  I have already mentioned the substantially reinforced fiscal and macroeconomic discipline framework: it needs to be recognised that this is a very important step given the transfers of sovereignty that it represents – we are moving towards a stronger economic union;  –  The European Stability Mechanism, whose implementation has been bolstered by the go-ahead given by Germany’s constitutional court and which held its first Board meeting, has a firepower of EUR 500 billion of new money to directly buy government bonds, provide collateral or lend funds. It will also be able to directly lend money to banks in difficulty without increasing the debt of their home countries as soon as the single supervisory mechanism will be in place. It is a powerful crisis resolution tool that Europe has equipped itself with; added to already disbursed bilateral and EFSF loans and to the existing EU facility, the total firepower will near 1000 billion of USD. –  The work on the establishment of the banking union is moving forward rapidly too. The Commission’s report that was submitted a few weeks ago sets out a clear framework: all banks in the euro area will quickly become subject to a single supervisory mechanism under the authority of the ECB. Day-to-day supervision will be performed by the national supervisors, in accordance with the principle of decentralisation that has already proved its effectiveness in the implementation of the single monetary policy within the Eurosystem.

As soon as the euro was adopted, they ceased to differentiate between countries and sovereign yield spreads narrowed, even aligning themselves at the lowest levels, i.e. those of Germany and France. For the first decade of EMU, the single currency appeared to play a buffer role that in addition to protecting countries against monetary instability – which the euro successfully did and was its raison d’être – also protected them against the economic reality. Member States were labouring under the illusion that they could, without ever suffering the consequences, allow themselves to flout the rules for budgetary discipline or make no efforts to remain competitive. The crisis came as a very severe wake-up call. 3. The third cause of this crisis, interlinked with the other two, is institutional: monetary union was not built on sufficiently robust economic, fiscal, financial and political institutions. The fiscal discipline mechanisms were insufficient, there was no mechanism for the surveillance of macroeconomic imbalances, nor was there a crisis management mechanism; financial union worked when times were good: banks held the bonds of other Member States, but it very rapidly fragmented when the crisis erupted, due to the lack of institutional soundness. 2. The causes of the crisis are being addressed  I will now explain how the euro area is dealing with the three fundamental causes of the crisis it is facing.
It cannot therefore be argued with great conviction that it is possible to identify one particular interest rate forecast that provides the indisputably "best" trade-off in monetary policy. More often than not, there will be a number of possible interest rate paths that might be said to provide a reasonable balance, in view of the uncertainty involved. The results of balancing this trade-off are published in the Inflation Report in the form of a chart that presents central projections for the interest rate, the exchange rate, inflation and capacity utilisation in the economy. The formulation of a precise inflation target, our projection for the interest rate 3 - 4 years ahead and our desire to achieve a balance between output and inflation stability may perhaps give an impression of excessive optimism with respect to managing the economy and invite a repeat of earlier attempts to fine-tune the economy. But it is important to bear in mind the lessons drawn from the 1970s and 1980s, i.e. high stabilisation policy ambitions may lead to wide fluctuations in the economy, with high  BIS Review 90/2006  3  and variable inflation. In our conduct of monetary policy, we must not underestimate the uncertainty surrounding the decisions taken. Even if the Bank publishes a forecast for the interest rate, this does not mean that the interest rate will follow the forecast throughout the projection period.

At the same time, the value of the Norwegian krone against the German mark was almost halved, which contributed to high imported inflation. During this period, monetary policy was not oriented towards stabilising inflation. In order to achieve price stability, monetary policy must provide the economy with a nominal anchor. From the mid-1980s, it was recognised that a substantial revision of economic policy was necessary and that the problems created by inflation had to be taken seriously. From 1986 to 1992, Norway operated a fixed exchange rate regime. At that time, the fixed exchange rate was the anchor for inflation in Norway. The difference between inflation in Norway and Germany narrowed substantially. Deteriorating competitiveness as a result of high wage growth would no longer be remedied by means of devaluations. Instead, imbalances in the labour market would be addressed by means of countercyclical policy. Substantial emphasis was placed on the importance of wage formation for employment. Only when wage growth dropped below the level of our trading partners did unemployment begin to fall and the manufacturing sector began to pick up. The fixed exchange rate policy was not introduced in order to strengthen the internationally exposed business sector. On the contrary, it was a departure from the approach where monetary policy and frequent devaluations had been used to shelter these sectors. The fixed exchange rate was an intermediate target for achieving low and stable inflation.
On that basis, it was possible to build a whole architecture of asset prices, whose relative riskiness is determined according to the intrinsic characteristics of assets and investors’ risk appetite. The important word here is “relative”. To price financial assets, markets need a basis – a risk free rate. That basis has now been shaken. Immediate consequences seem benign in the US. Markets have judged, and rightly so, in my view, that there is currently no alternative to US debt as the most liquid market and it remains the ultimate benchmark for assessing risk. So, if anything, the downgrade of US debt was followed by new inflows into Treasuries and a decrease in US interest rates across the yield curve. At the same time, however, a pervasive uncertainty has been created, which might be  BIS central bankers’ speeches  1  responsible for the strong decline in confidence and equity prices that has occurred over the last weeks. In Europe, of course, sovereign credit risk has had more immediate and dramatic consequences, with an abrupt increase in sovereign spreads for peripheral countries following the July 21st statement. It remains difficult to foresee how, in the longer run, markets will assess debt sustainability in different countries and jurisdictions. That assessment depends on a complex process, where, together with economic fundamentals, subjective probabilities, self-fulfilling beliefs and other influences play a major role. The certainty that debt would be paid in full strongly anchored market perceptions in the past.

Strength of our country is the fact that compared to earlier low-growth periods it has more liquid external funds available. At the same time, the financial sector is healthy and non-performing loans have diminished over time. Reforms currently under discussion, particularly a New General Banking Law, aim to bolster resilience and improve banking capital adequacy ratios (figure 10). Figure 10 Regulatory Capital  NPL  (percent of risk-weighted assets)  (percent of total loans)  Latin America (*)  Chile  18  18  15  15  12  12  9  9  6  6  3  3  0  0 10  11  12  13  14  15  16  3  3  2  2  1  1  0  0 10  11  12  13  14  15  16  (*) Shows the region’s simple average. Source: Global Financial Stability Report, IMF. The medium- and long-term outlook 19. The Chilean economy has endured a long period of slow growth, while its potential growth has dropped to a range between 2.5% and 3%, i.e., less than estimated a decade ago (4% to 5%). In principle, this change is explained by: (a) a smaller contribution of the accumulation of productive factors, inherent to a maturing economy; (b) a drop in gross fixed capital formation that has lasted several years; (c) reduced mining productivity; and (d) a limited contribution of productivity growth in the other sectors. 20.
Between 2007 – right before the last recession – and last year, employment grew by 10 percent in New York City, making it one of the best performing areas in the nation. In the Bronx, employment grew even faster, rising by more than 14 percent. While job creation in the Bronx has been quite broad-based, I would like to highlight two particular industries, each very different in nature, to illustrate the diversity of Bronx’s economy. Both health services and wholesale food distribution have been flourishing here. These sectors, on average, pay relatively well and both have been contributing strongly to 1  Jason Bram, Christopher Calabia, Tony Davis, Jacqueline Fenton, Claire Kramer Mills, Don Morgan, James Orr, Joseph Tracy and Luis Uranga assisted in preparing these remarks. BIS central bankers’ speeches  1  overall job creation and to the borough’s economic resurgence. By health services, I don’t just mean hospitals and clinics serving the local population. For example, Montefiore Medical Center is a nationally-ranked institution in a variety of specialties as well as a highly regarded teaching hospital. Additionally, the Albert Einstein College of Medicine is a graduate medical school and clinical research facility. And, of course, the Hunts Point Food Distribution Center houses institutions such as the Fulton Fish Market, which moved here from lower Manhattan about a decade ago. But, of course, these aren’t the only industries driving the Bronx economy.

If anything, it looks to be slightly lower than anticipated. However, so far this year wage costs per produced unit nevertheless appear to have increased by more than we had expected as a result of the weaker productivity. Employment continued to increase during the second quarter of this year, but unemployment remained largely unchanged compared with one year ago. The outcomes were close to the forecasts. The number of hours worked per week continued to increase during the first half of the year, which contributed to a decline in productivity. The Economic Tendency Survey in July was also weak. It fell and now indicates that the Swedish economy is much weaker than normal. It is mainly households that are contributing to the low level. This is the most pessimistic that households have been about the Swedish economy for 15 years. The confidence indicator for the Swedish business sector fell, but it is nevertheless at a level corresponding to the average since 1996. The Economic Tendency Survey also shows that sales prices in the wholesale and retail trade continued to rise to a large extent and that continued increases are predicted for the third quarter. Households’ and companies’ inflation expectations continued to rise. They even rose more than is indicated by statistical correlations between inflation and inflation expectations. However, inflation expectations as measured in the bond market, what is known as breakeven inflation, have declined. Inflation rose from 4.0 per cent in May to 4.3 per cent in June and 4.4 per cent in July.
7  Losses in AIG’s securities lending business were reported in the firm’s 2008 10-K submission to the SEC, pp 166–167. 8  This issue may now be on the agenda of insurance regulators. See the recent Joint Forum report, “Review of the Differentiated Nature and Scope of Financial Regulation”, January 2010. BIS Review 6/2010  5  Report Committee provides one forum for the different parts of the market and authorities to debate these issues. 9 RMBS, repo and shadow banking Perhaps the market that has been most discussed in the wake of the crisis has been the RMBS market. Right now, most of the discussion is about how to revive the mortgage-bond market, and the securitisation markets more generally, given their potential significance for the financing of households and firms. That eagerness is hardly surprising given the likely strain on the Western world’s banking system if, over the coming few years, it had to reintermediate flows of credit that had previously gone through the ABS markets. Some have suggested that asset-backed-securities are yet another form of shadow banking. At one level, this seems obvious. Take Northern Rock. When it ran out of money, the authorised bank had a balance sheet of around £ virtually all mortgages. The same management team was running the “Granite” securitisation vehicle; also with a balance sheet of about £ and also all mortgages. Granite held surplus liquidity with its sister bank, which was not immaterial to Northern Rock’s funding.

Rather, I am interested this evening in those instruments, structures, firms or markets which, alone or in combination, and to a greater or lesser extent, replicate the core features of commercial banks: liquidity services, maturity mismatch and leverage. In that spirit, I will say something about money market mutual funds; finance companies; Structured Investment Vehicles and Asset Backed Commercial Paper; and securities dealers. I will also say something about some markets. In particular, the securities lending market; but also how the RMBS/ABS market can combine with repo funding to create investment structures whose leverage and liquidity risk creates some of the brittleness of banking systems. It is not intended to be an exhaustive, systematic survey. And beyond those interested in the details of how markets work, it is the general message that matters. Because some common threads are clear. Notably, maturity and credit transformation. Each of the vehicles, instruments or markets I will discuss has been used to transform longer-maturity, less liquid assets (loans) into shorter maturity, more liquid liabilities. In each case we need to decide whether or not we want to set constraints around the operation of those forms of shadow banking. And we need some principles to guide us when, inevitably, we confront new variants of shadow banking in the future. I do not have all the answers to these questions, so my goal this evening is to push them up the agenda. As the Governor of the Bank has underlined, it is vital we debate the structure of the financial system.
And as is discussed in the aforementioned Central Bank report, such exchange rate volatility can sometimes be a source of economic volatility. Furthermore, as examples have shown, lack of fiscal discipline together with overly loose financial regulation and lax supervision can undermine independent monetary policy with either a floating or a fixed exchange rate, even if the latter takes the form of a currency board. The “capital flow problem”, as we could call it, lies in capital inflow surges based on excessive optimism and underpricing of risk – capital inflows that then stop and reverse, with fire and brimstone and severe repercussions for economic and financial stability. Experience shows that this problem is not limited to countries with a floating exchange rate – quite the contrary, in fact. Countries with a pegged exchange rate have suffered severely from just such a scenario, as have countries within the euro area. This problem was a key player in the crises in Greece and Spain, to give two examples. As a consequence, there is no less need for so-called macroprudential tools in countries with a pegged exchange rate or countries in a currency union than there is in countries with independent monetary policy and a floating currency. Some view foreign exchange reserves as the cost of pursuing independent monetary policy.

With customers’ consent, banks can have direct, efficient access to a substantial body of data. That will enable them to offer the most suitable services to customers, or perform more precise and objective credit assessments. And that, in turn, will help banks address the pain points I mentioned. 27. Let me give you an example of what CDI could deliver. A family-run noodle shop which has problems getting bank credit can now choose to allow its bank to access historical turnover data from its point of sale terminals. With access to this data, and by using AI tools, the bank should be able to make an accurate forecast for the noodle shop’s sales. That means it can make a credit decision without having to first ask the owner for loan collateral. Hopefully, the noodle shop is successful and its sales rise above the projections in the bank’s model. Then its credit limit can automatically be increased by an appropriate amount. 28. Small importers and exporters might also benefit. Through CDI, they could authorise trade servicing platforms to allow their banks to access reliable trading data. This should help banks understand their customers’ trade counterparties, which can reduce money laundering risk. Because of this, the trading companies’ access to financing should improve, and their cost of borrowing should fall. 29. With CDI, our aim is to enable bank customers, particularly SMEs, to take more control of their own digital footprint, so that they can use their data to enhance their access to financial services. 30.
Households and firms reduced their expenditures in preparation for a possible catastrophe,  BIS Review 145/2009  3  causing a much larger drop in demand than would have occurred without the crisis of expectations. In hindsight, you can say that we overreacted, because the catastrophic scenario did not materialize. But the loss of confidence had a real foundation, both because of the deteriorated global macroeconomic and financial conditions and because we were enduring the deepest crisis ever. In this context, there was also the uncertainty about how and how effectively policies would operate, which has faded thanks to the determination of central banks and finance ministries in the larger part of the world. In our case, the quick reaction of macroeconomic policies has been essential in mitigating the impact of the external crisis. Although our GDP will fall this year, the performance of our economy, from a historic perspective, has been remarkable. In 1982 and 1983, the Chilean economy grew nearly 18 percentage points lower than the world’s average. In 1998 and 1999, this difference was around 4 percentage points. In 2009, estimations point at the drop in output in Chile similar to the world’s average (figure 8). Monetary policy can do little to avoid the immediate effects of this kind of confidence crisis. However, policies do play an essential role in preventing these crises from aggravating, and they provide the grounds for the recovery of expectations. To that end it is necessary to act in a timely manner and with conviction.

Figure 7 Foreign credit flows to residents (billions of dollars) 3.0  3.0  2.5  2.5  2.0  2.0  1.5  1.5  1.0  1.0  0.5  0.5  0.0  0.0  -0.5  -0.5  -1.0  -1.0  -1.5  -1.5  -2.0 Jan.07  Jul.07  Jan.08  New credits to banks  Jul.08  Jan.09  -2.0 Jul.09  New credits to non-banks  Net flow (*) (*) Discounting bank and non-bank amortizations from total new credits. Source: Central Bank of Chile. BIS Review 145/2009  9  Figure 8 World growth (1) (annual change, percentage) 15 12 9 6 3 0 -3 -6 -9 -12  80  84  88  92  96  00  04  World at market exchange rate  15 12 9 6 3 0 -3 -6 -9 -12  08  Chile (2)  (1) Gray area shows projections as from 2009. (2) Figures for growth in 2009 and 2010 stand for the midpoint of the range of projections shown in the Monetary Policy Report. Sources: Central Bank of Chile, International Monetary Fund and World Bank.