samchain/econo-pairs-v1 huggingface dataset:
It then takes  Bank of England  Page 3  time for changes in those spending choices to affect prices in the shops. This means that the Monetary Policy Committee needs to look ahead and focus on the outlook for inflation, as much as on its current level, when deciding the appropriate level of Bank Rate today. When we look at the outlook for inflation today, we have to recognise that the full effect of the higher level of Bank Rate is still to work its way through financial markets and the real economy. There is another complication. What actually happens in the economy – to economic activity and inflation – will be determined by aggregate demand and supply. Economic life plays out at the intersection between them, in an economic equilibrium. While it is sometimes useful to focus on one of the two, taking the other as given, we always have to bear in mind that market economies work through the forces of both demand and supply. For monetary policy, the natural starting point is the demand side. Monetary policy exerts a powerful influence on the components of aggregate demand – on consumption and investment – but it can do little to affect the supply side – the production technologies and know-how used to make goods and services available for use in the economy. But ultimately, it is the balance between demand and supply that determines inflationary pressures in the economy.

Over the short term, moreover, the actual equilibrium interest rate, r*, will fluctuate around the trend level, R*, driven by shorter-term influences from both demand and supply. This is what matters for monetary policy here and now. Why? Because r* is the rate at which demand is in line with supply so that there is no output gap – neither excess demand nor excess supply in the economy. Responding to shifts in r* is what helps keep inflation close to target. This does not mean that monetary policy should always align Bank Rate exactly to r*. Sometimes, monetary policy faces trade-offs between inflation and the balance of supply and demand. But it does mean that supply matters for monetary policy also in the short run. By determining the level of demand the economy can sustain without generating excess  Bank of England  Page 10  inflationary pressures, it affects the appropriate level of interest rates, effectively by setting the speed limit for the economy. And when shocks drive inflation away from target in the way we have seen, monetary policy responds by steering demand to a level – relative to supply – that ensures that inflation returns to target sustainably. Monetary policy cannot affect this level of supply. But the level of supply will affect the appropriate setting of monetary policy. It matters, therefore, that big shocks to the economy have weighed heavily on supply in recent times.
In contrast, air fares, university accommodation fees, foreign students’ university tuition fees and payments by residents of nursing and retirement homes are excluded from the national index but included in the harmonised index. Year-on-year growth figures in April showed a difference of nearly one percentage point between the Bank of England’s index (RIPX) and the HICP. This index tied to the inflation target showed 2 per cent growth in the last 12 months, whereas the harmonised index showed an increase of 1.1 percentage point. Different treatment of housing costs pushed the national index up by more than ½ percentage point compared with the harmonised index. Different weighting methods accounted for a similar proportion of the increase. Different weights reduced 5 growth in the national index by nearly ¼ percentage point compared with the harmonised index. Predictability, transparency and communication Central banks control the volume of central bank liquidity or the interest rate on this liquidity. Most central banks use the interest rate on intra-day liquidity. In Norway, this is the interest rate on banks’ sight deposits with Norges Bank, the sight deposit rate. Banks’ net position vis-a-vis Norges Bank fluctuates around zero. By comparison, household and private sector domestic gross debt amounts to roughly NOK 1500 billion, whereas the total money supply is approximately NOK 750 billion. Our key rate has a direct influence on a very small portion of the total money and credit market.

Monetary policy would not affect price inflation if our key rate only influenced the interest rate on the amount outstanding between the central bank and the banks. We are dependent on a spillover effect on interest rates on debt in the household and enterprise sectors. The link between these variables and the key rate runs through market expectations and the yield curve. Long-term interest rates that are determined by the market reflect expected future short-term rates, uncertainty and risk premiums. Interest rates on money market investments with maturities of more than one day will be influenced by expectations about changes in Norges Bank’s rates in the future. Interest on investments that mature in one week will be a weighted average of expected interest on one-day investments in the days up to maturity. Similarly, three-month rates reflect both prevailing and expected future overnight rates. If economic agents believe that Norges Bank will reduce interest rates in the next few weeks, three-month-rates will be lower than interest on kronedenominated assets with shorter maturities. Similarly, if economic agents believe that Norges Bank will raise interest rates in the next few weeks, three-month-rates will be higher than rates on kronedenominated assets with shorter maturities. If there is confidence in monetary policy, changes in Norges Bank’s rates will have little effect on longterm interest rates. These rates will then primarily be determined by the demand for real return on capital that originates in the international capital market.
10 It is also encouraging to see that an increasing number of Asian universities have become recognized as top-tier at a global level. According to some recent university rankings, more than ten universities in Asia are among the best 100. 11 Remember that the success of Bangalore also lies in the fact that local IT firms were able to recruit many highly skilled graduates from nearby universities. Against these backdrops, Asian has made larger contributions to the development of science. For instance, the share of Asian born Nobel prize winners in scientific fields doubled to more than 10 percent after the turn of the millennium. 12 These truly top academic scholars have influenced the development of human capital in their own countries in various forms as exemplified by Professor Sen himself in front of us. The second key to higher productivity is a market-friendly business environment. For example, a critical precondition for market functioning such as property rights protection, or the rule of law more generally, is an indispensable ingredient for an innovative environment, which in turn is the basis for productivity growth. I firmly believe, as many economists do, that  10  Enrico Moretti, The New Geography of Jobs, Mariner Books, 2013. 11  See, for instance, Times Higher Education World University Rankings. 12  Nobel prizes in the areas of physics, chemistry, physiology or medicine, and economic sciences.

Haruhiko Kuroda: How to sustain economic growth in Asia Speech by Mr Haruhiko Kuroda, Governor of the Bank of Japan, at the Amartya Sen Lecture, organised by the Cambridge Society of Thailand, Bangkok, 21 July 2015. *  *  *  Accompanying charts can be found at the end of the speech or on the Bank of Japan’s website. Introduction It is a great honor to give a presentation in front of such a distinguished audience, especially Mr. Anand Panyarachun and Professor Amartya Sen. I have admired Professor Sen ever since I became acquainted with his work when I studied economics at Oxford, about 45 years ago. At that time, I was fascinated to read not only his elegant theoretical papers on social choice but also his research on poverty and inequality, which has had a huge impact on development economics. Today, I have chosen a topic which is inseparable from the subject of development, and that is economic growth. More specifically, I would like to discuss how we can sustain economic growth in Asia. As Robert Lucas has correctly pointed out, “Once one starts to think about economic growth, it is hard to think about anything else.” 1 Therefore, I will take off my central bank governor’s cap for a while, and there will be no mention tonight of either “unconventional monetary policy” or “quantitative and qualitative monetary easing.” In recent years, the question of how to sustain economic growth has become an increasing preoccupation both within academia and among policy makers.
So the challenges are ahead of us. It is not easy to change mindsets. Remember, that a lot of people in this country, particularly those who work for the government have been used to a war situation. For most of their working lives, they have been living in a war economy. A war economy is very different from an economy at peace. That, in my view, is why you had a change of government this year and you have a new government, who is trying to win the peace. We won the war, but it was very difficult to win the peace. Why? Because our mindsets were stuck in the past. There was that concept of control. You had to control everything in the economy including prices. When I say prices, I mean the exchange rates, the interest rates, other prices which affect the functioning of the economy. That is all justifiable in a war situation. But when you come into a peace situation, where it is a normal functioning market economy, then you have to re-think, you have to get back to first principles, and reassess how the economy should work in a new dispensation.

That is partly because banks have been extremely conservative in the last twenty to thirty years because of the war situation and they did not lend aggressively. More recently we saw some of them becoming a little aggressive and they got a bit burned when agriculture  BIS central bankers’ speeches  1  was affected by the drought last year. Then you saw the big exposure to gold and pawning activities which also affected bank balance sheets slightly. Most of those problems I am glad to say, seem to be behind us. So the banking system looks in fairly good shape. Finance companies pose some concerns and. I think we have far too many of them. We were a bit too liberal in-terms of encouraging finance company growth in the last ten to fifteen years. As a consequence, today we are coping with some unusual situations in that sector. But there again, with some resolve and some out of the box thinking, we will be able to bring that sector also under control. So all in all, I think the financial system is responding favourably.
There is an ongoing debate about the reasons for the decline in long-term real interest rates over the last few years. I will not elaborate on that debate here; it is a subject worthy of a seminar by itself. One particular possibility, pertaining to the discussion of the roles of the real interest rate, is that the fall in long-term interest rates may partly reflect market participants’ assessment that the neutral real interest rate has fallen. During a business cycle, it is the real interest rate’s deviation from the neutral real interest rate – the real interest rate gap – that indicates whether monetary policy is expansionary or contractionary. The neutral real interest rate is difficult to estimate and may change over time. Nevertheless, we have tried. On an uncertain basis we estimate that the neutral real interest rate for Norway may now be close to 2½ per cent, having come down approximately 1½ percentage points since the mid-1990s. Forecasts in the latest Inflation Report indicate that the short term real interest rate in Norway will be close to its neutral level in about four years. According to this, the real interest rate gap (the difference between the neutral rate and the actual rate) has been negative since 2004. There is evidence that monetary policy has had the desired impact both on the real economy and on inflation. Monetary policy at the present phase of the cycle Growth in the Norwegian economy has been high since summer 2003. The expansion has gradually broadened.

But the interest rate should also contribute to equilibrium in the market for real capital in the long run. To achieve this, the real interest rate must not over time deviate too much from the return on real capital. Substantial deviations can give rise to undesirable fluctuations in the markets for real capital that have no basis in economic fundamentals. In Norway, both short- and long-term real interest rates are at the moment at a low level, compared to the past few decades. This is also the case in many other countries. How large the deviations from the neutral and the equilibrium rates are, on the other hand, is less clear. Neither the neutral rate nor the equilibrium rate are variables that can be observed. Economic theory can contribute insight into the factors that determine the equilibrium rate, but attempts to quantify it based on theory yield an uncomfortably broad interval. An alternative is to use historical average interest rates on the basis of an assumption that actual real interest rates will vary around the equilibrium rate. This method also poses problems, however. 2  BIS Review 22/2006  Throughout the period 1870-2005, the average long-term real interest rate in Norway has remained close to the average in the UK and the US: Norway 2.2 per cent, the UK 2.0 per cent and the US 2.8 per cent. In all countries, fluctuations in real interest rates have been substantial in periods. The real interest rate has fallen markedly since the beginning of the 1990s.
Or were high interest rates on the contrary needed to prevent the flight of necessary capital, a weakening of the exchange rate and the failure of companies with foreign-currency debt? Or was it perhaps the case that the high interest rates led investors to expect additional business failures and social unrest, so that they withdrew their capital for precisely this reason? As we do not know what a different direction of policy would have led to, even today we cannot tell what would have been most appropriate. But we do know that the tight nature of many of the programmes was eased as time went by, partly as the crisis became less acute and the shortage of foreign currency less troublesome. Another question concerns the structural changes and reforms that were required in connection with some programmes. Such conditions may be justified as regards the banking sector or bankruptcy proceedings, for example, as these are often clearly a part of the problems. They are more questionable, however, when they concern components of the economy that are not self-evidently connected with the current stabilisation problems. There were elements of this in, for example, the programme for Korea, which stipulated measures for the liberalisation of imports. Such matters are  BIS Review 2/2002  5  liable to discredit the IMF, besides leading to the IMF’s proposals encountering more opposition than otherwise in the borrower countries.

Andrew Bailey: A resilient financial system Speech by Mr Andrew Bailey, Governor of the Bank of England, at the TheCityUK Annual Dinner, London, 10 February 2022. * * * It’s a pleasure to be here this evening, and let’s take the fact that we are able to be here as a positive sign of things to come. Adrian, it’s timely to recall that, early on in the Covid era, you and I started to talk about the importance of ensuring that the financial system was able to support the economy through the pandemic, and about the need to mobilise to ensure that long term capital would be available for businesses as we came out of the pandemic and beyond. Those discussions formed an important input to the work of the Productive Finance Working Group, work which continues and for which I want to thank John Glen for his leading role and commitment and Nikhil Rathi too. That work is not done, but it has more momentum and substance as a consequence of our early engagement. I am going to say a few words on the subject of resilience, what it means in finance and how important it is. In March 2020, nearly two years ago, we had our initial very difficult time with some financial markets, the so-called “dash for cash” where weaknesses in the system of market based finance amplified the initial covid shock.
In each of the scenarios, we are capable of returning inflation to target over the forecast horizon. We create these scenarios so that our policy is predictable for entrepreneurs and the real economy even if things change. In that scenario planning, we have to look into many uncertainties and multiple factors. In conclusion, I would like to thank you for your constructive cooperation and the efforts to finalise the Monetary Policy Guidelines, both within the working group and the joint meeting of several committees. Importantly, this year’s Guidelines take into account the feedback we have received from deputies. For example, we have started to publish a forecast for the average annual key rate, which we believe further increases the predictability of our policy. In line with our discussions this year, it is recommended that future releases of the Monetary Policy Guidelines offer insights into such key areas as the infrastructural impact of public investment and the development of specific industries from the economic potential perspective, as well as an assessment of demographic trends and the climate agenda. We will try to cover all these points in future releases of the Guidelines. Thank you so much for your time. I am ready to answer your questions. 4/4  BIS central bankers' speeches

Credit union meets robot Speech given by Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer, Prudential Regulation Authority  Mansion House, London Thursday 24 October 2019  I am very grateful to Hannah Schraer for her help in preparing this speech. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches  Introduction Earlier this year I gave a speech, which fortunately for most of you in this room you did not have to sit through, on competition. I avoided the temptation to list all of the things we’ve done to facilitate competition and instead posed a set of seven questions which I think are more awkward for us. The three-line version of that speech is this: we’ve done a lot to lower prudential barriers to entry into the banking sector, with the result that we’ve got a lot of new banks. But have we done enough to lower the equivalent barriers to growth, given no little bank has recently become a really big bank? Since then I have unleashed the competition team within the PRA to roam about the institution digging up whatever they can find on the barriers to growth issue. They have already come up with two things.
It would become more a matter of prudential policy, not to say the fundamental structure of the financial system. Conclusion The word “digital” has become so ubiquitous that its meaning isn’t always clear. The word seems to get tacked on to just about anything, no matter how tenuous its connection with computers, simply in order to convey an appealing sense of the modern. A brief search – on the internet, appropriately enough – reveals advertisements for a course in “digital humanities”, opportunities in “digital agriculture” and even something called “digital parenting”, whatever that is. (If it means having to ask your 11-year-old son what’s gone wrong with the computer then I would certainly qualify as a “digital parent”). Whether or not “digital currency” is the right way to describe something like bitcoin, or its central bank counterpart, is also unclear. A better term for the underlying technology, the distributed ledger, might be “decentralised virtual clearinghouse and asset register”. But there’s no denying the technology is novel. Prospectively, it offers an entirely new way of exchanging and holding assets, including money. It’s an irony, therefore, that some of the economic questions it raises have actually been around for a long time, for as long as economics itself. Some admirers of bitcoin see it as a means of bypassing central banks altogether. They are in some ways the descendants of the supporters of “free banking” in the 19th century.

And in the US, there is a divergence between weaker soft data like the ISM manufacturing survey index and still rising hard data on industrial production. Hence, restoring confidence should be the priority and it is the responsibility of political leaders: the best antidote to the current slowdown is to reduce geopolitical risks, more than changing economic policies. The French economy has been slowing down but less than in some other European countries, due to increasing purchasing power and resilient domestic demand. In 2019, French growth is expected to be higher than that of Germany and close to the euro area average. Beyond internal demand, the second pillar of European resilience should be the extension of domestic reforms. I would like here to take the example of the Portuguese recovery since 2014, after a severe crisis and courageous adjustment efforts: GDP is now growing at 2.1% in 2018. Ambitious reforms have improved cost competitiveness, boosted export performance and led to a sharp fall in the employment rate, which has more than halved since 2013. This clearly demonstrates that, in Europe, reforms do have a positive impact. 2. Our monetary policy is able to combine clarity and flexibility. Let me turn to the consequences for our monetary policy: to deal with uncertainty, we have to combine clarity and flexibility, as we did in our December’s chained guidance. I will come back to this. In the present context, we should favour state-dependent analysis over time-dependent variables.