samchain/econo-pairs-v1 huggingface dataset:
On a related point, there has been talk that the current environment of fluid global liquidity has led to depressed long rates in Asia, thereby complicating the conduct of monetary policy. This is indeed a possibility. However, capital inflows do not significantly weaken the interest rate tool of the Bank of Thailand. The Bank of Thailand focuses on short-term rates in conducting monetary policy as the Thai economy is bank-based and most short and long-term loans have freefloating interest rates. I have discussed how monetary policy should be poised and pre-emptive. Lastly, monetary policy must also be perceptive, or at least strive to be so, of medium and longer-term  BIS central bankers’ speeches  3  issues. Let me highlight three issues: beyond normalization, financial imbalances, and global imbalances. On the first issue, what lies beyond normalization? The prospect of further tightening depends on how far the balance of risks will shift to inflation and financial imbalances. A prolonged oil price surge may trigger inflation and tightening in Thailand. The downside risk scenario of high oil prices and global recession or global stagflation may materialize, depending on the complex interplay between uneven global recovery, fluid capital, supply shocks and policymakers’ response. The global environment is constantly changing. New information and developments force us to revise our views. In such a world, being poised is particularly important. For being poised allows for a timely response as long as we are aware that we are performing a balancing act on top of the US/Euro balancing act.

Central bankers frequently meet in international policy fora, such as those organized under the auspices of the BIS, IMF or G20, etc. Yet I hope today’s Symposium will be a special occasion to stimulate this exchange of views and build on it with academics, financial institutions and the public at large, since it is broadcast live on the internet. Therefore, I would like to hand the floor without further ado to Haruhiko Kuroda. BIS central bankers’ speeches  3
In this FS Report, we emphasize that in recent times the Chilean financial system has seen no major disrupting events, and the information at hand indicates that it is in a good position to withstand the impact of stress scenarios. Both domestic and external payment systems have operated normally, while credit risk indicators have remained low. However, recent developments indicate a gradual increase in the latter. One important risk is that, if the economic slowdown continues as it has for some years, this deterioration might deepen. On the external front, the risks identified in the FSR are similar to those I just described for the Monetary Policy Report. Note that global uncertainty is still high, so going forward, the risks of revisions to the world economic outlook cannot be ruled out. Note also that possible increases in long-term interest rates in international markets, besides entailing a forex effect, might be transmitted to local rates and translate into higher funding costs for local agents. As I just said, the cost of local short- and long-term financing reached record lows, in line with market expectations for the MPR and the environment of low long-term external rates. In this context, institutional investors made moderate changes in the composition of their portfolios. In particular, the assets in layer 1 mutual funds continued to grow relative to the other funds; Life insurance companies continued to increase their positions in real estate investment; and pension funds increased their exposure in local bonds.

It should be noted that although the economic outlook has deteriorated in recent years, the capitalization of the banking sector has not changed significantly. The system's capital adequacy ratio (CAR) stands at 13% since mid-2016, close to its historical average, but still below international standards. Stress tests show that the banks' capital gap has narrowed over the last few years. Thus, the fraction of banks with a CAR above 10% after a severe stress scenario would go from representing 85% of the system's assets in 2011-2014, to 50% in the last two years (figure 17). This is so because the banks that are most exposed to the economic slowdown have not adjusted their capital levels accordingly. In this context, the new General Banking Law would 8  contemplate a gradual convergence towards the Basel III framework, which has implicit higher capital requirements for the banking system. I would like to end this presentation with some thoughts. Concluding thoughts The two reports I just presented (i.e., the Monetary Policy Report and the Financial Stability Report) provide us with a full overview of the Chilean economy, that includes not only its most likely trajectory, but also the risks that might push it away from it. This illustrates the fact that monetary and financial policies are two important complements in Chile’s macroeconomic policy scheme.
11 Sharp falls in wealth and increased uncertainty about future incomes following the financial crisis have undoubtedly changed many people’s retirement plans, making them work longer and retire later in order to compensate. 12 And the scale of the debt accumulated by Britain’s households in the run-up to the recession has encouraged more people to work, and to work longer. 13 Around 40% of households reported being concerned about their levels of debt in 2013. 14 Almost a tenth of households in a recent Bank of England survey said they were working more because of concerns about repaying their debt. So the strong performance of the UK labour market reflects in part people feeling compelled to work for financial or other reasons. When British workers have been challenged, they have not given up (Charts 5–8). Some have taken less productive or lower-skilled jobs. Others are working part-time. Some have become self-employed. Others are prepared to do the same work for less than they would have done. Wage pressures are, on past relationships, as low as if the unemployment rate were around 10%, not the 6.4% it is today (Chart 9). 15 With more workers at competitive wages, companies have been encouraged to hire. They already had reason to favour labour over new capital investment given the higher cost and lower availability of credit following the financial crisis. 16  4 percentage points – perhaps indicating a desire by couples to coordinate their retirement planning.

Before I turn to Iceland’s situation now and in the near future, I would like to place us in a wider international and historical context. Iceland is truly a small country, and individual positive or negative shocks can trigger economic short-term developments that deviate markedly from those in the rest of the world. But in the end, the possibilities are always limited by global trends. Since the latter half of 2009, the global economy has begun to grow again after the recession that followed the peak of the 2008 financial crisis, but there are still a number of questions about what will come next. Output growth varies greatly from region to region, with a number of emerging economies soaring ahead while many of the developed economies hit hardest by the crisis are not growing fast enough to reduce unemployment, and near-term developments are a source of concern. At work here, to some extent, is the long-term tendency for the divide between emerging and developed countries to narrow. The trend is not necessarily a linear one, though; it tends to play out in fits and starts. But in my opinion, more is involved. Last month I had the opportunity to attend a conference held annually in Jackson Hole, Wyoming, by the US Federal Reserve Bank of Kansas City.
Fourth, because the IMF is the only institution capable of mobilising a substantial amount of resources if a global crisis occurs. A good example of how institutions can adapt and react to challenges is the approval of the banking regulation reform package known as Basel III by the Basel Banking Supervision Committee. This, along with the work by the Financial Stability Board in the general financial field, has allowed many of the shortcomings identified by Professor Ontiveros in the preglobal financial crisis framework to be tackled. The aim of these reforms has precisely been to strengthen banking regulation, supervision and practices internationally for the sake of financial stability. In addition, efforts are under way to adapt this regulatory framework for 4  the entry of new competitors, such as Fintech and Big Tech companies, so as to safeguard savers and the integrity of their privacy, along with level playing field conditions. In short, multilateral organisations remain pivotal. And this is why they should be reformed and adapted to the new circumstances and be more flexible, cooperative and complementary to the new plurilateral institutions that have arisen at regional level, while becoming more transparent, democratic, representative and subject to public scrutiny. We must also equip the multilateral system and its benefits to the public at large with greater visibility, so it may recoup its legitimacy and the support of citizens.

Specifically, I should like to reflect with you on the causes behind the launch of this project and what it has meant to date. I wish to frame it in terms of the safeguarding of the euro,  2/10  but I also aim to cover those elements which, in my view, are lacking when it comes to attaining a truly European and cross-border integrated banking sector. I shall also refer to an even broader objective: namely, achieving a real “Financial Union”. The Banking Union would be part of this, but it would encompass other elements, such as the so-called “Capital Markets Union”. European construction I think it is fair to point out that, since its creation, the EU project has improved the life of millions of European citizens. It has done so not only in economic terms, but also as regards rights and standards of living throughout the Union. Naturally, the success of this common project cannot be judged solely in terms of its economic results; we must also consider its other initial goals. These include increasing the level of political integration and promoting peace, European values and the well-being of European peoples. We should not forget that the European Union was conceived with the aim of ending armed conflict between neighbouring countries, following the horror of two World Wars. The creation in the 1950s of the European Coal and Steel Community was the first step towards an economic and political union of the European countries, with the ultimate goal of ensuring lasting peace.
If it appears that inflation will be higher than 2½ per cent with unchanged interest rates, the interest rate will be increased. If it appears that inflation will be lower than 2½ per cent with unchanged interest rates, the interest rate will be reduced. This orientation of monetary policy will normally also contribute to stabilising output and employment. A time horizon of two years when setting interest rates allows monetary policy to contribute to stabilising production. This horizon prevents monetary policy in itself from causing unnecessary fluctuations in the economy. A relevant example is the outlook for the next two years. Against the background of the recent years’ appreciation of the krone, consumer price inflation is projected to be lower than the inflation target over the next year and then move up towards 2½ per cent in two years. As an alternative, we could have sought to achieve the inflation target of 2½ per cent using a time horizon of six months to one year. We would then have had to reduce the interest rate sharply this summer. This would have amplified the pressures in the Norwegian economy that are so clearly reflected in wage developments and household credit demand. In all likelihood, this would have required marked interest rate increases one to one and a half years ahead. Strict inflation targeting of this type would thus have resulted in more pronounced fluctuations in the interest rate and in aggregate demand and employment.

I want to emphasize that this is first and foremost a public health crisis, and a human tragedy. It’s our doctors, nurses, and healthcare professionals who are on the front lines, fighting this disease and caring for those who are suffering. We owe them a great debt of gratitude. My sincere thanks is also with the grocery store workers, those in law enforcement and transportation, and everyone who continues to carry out essential work each day. The Scale of the Challenge The necessary actions taken to slow and contain the spread of the coronavirus are not only changing how we live our lives, but are also having a profound effect on the economy and financial markets, both here and abroad. Although many people have drawn comparisons with the financial crisis of 2008, the current turmoil is fundamentally different from recessions of the past. The challenges before us do not stem from vulnerabilities at banks or the bursting of a bubble—I can only liken them to a natural disaster of global proportions. If we look back to February, the American economy was strong, with unemployment at historical lows. But, now, social distancing and other restrictions imposed in response to the pandemic are causing severe, rapid declines in jobs and income. Unprecedented numbers have filed for unemployment insurance in the past several weeks alone, and we know that more economic pain is still to come. The reality is that the full scale of the economic consequences is still unknown.
This has been the case not just because a number of currencies replaced by the euro played an important international role in the past but also because the euro has become the currency of an economic area which roughly equals the United States in terms of economic size and external trade, and which has the world’s second largest capital markets. Let me emphasise at this juncture that the Eurosystem has no exchange rate target vis-à-vis other major currencies. We are also not participating in a formal exchange rate arrangement with third countries outside the EU, for instance with the United States, and we believe that this situation will continue in the future. It is important to mention that according to the Treaty the single exchange rate policy has to respect the primary objective of price stability. As the representative of a large economic area, the Eurosystem can best meet its overriding objective to maintain price stability in the euro area if it is not constrained by an exchange rate target. However, for smaller, very open economies, setting an exchange rate target may be a very reasonable decision. Against this background the ERM II exchange rate mechanism was created for those member states which have not yet joined monetary union but are willing to do so in the near future. Experience with the European Monetary System (EMS), the predecessor of ERM II, has shown that participation in a system of this kind may facilitate the fulfilment of other convergence criteria.

The second pillar of the Eurosystem’s strategy therefore consists of a broadly based assessment of the outlook for price developments and the risks to price stability in the euro area as a whole. This broadly based assessment takes into account, inter alia, the information provided by wage developments, exchange rates, fiscal indicators, real economic activity, and asset and commodity prices. Forecasts of economic activity and prices in the euro area can certainly also contribute to the success of an appropriately forwardlooking monetary policy. Thus we take into account forecasts available from international organisations such as the IMF and the OECD as well as internal forecasts. 3  BIS Review 60/1999  We are aware that forecasts have to be interpreted with great caution. Given behavioural, institutional and structural uncertainties, forecasting price and other developments in the euro area is inevitably difficult. Moreover, a forecast cannot encompass all the indicator variables that are important for monetary policy. Nor can it always incorporate indicators in a timely manner. Furthermore, by the time the forecast has been finalised, the original assumptions may have become less realistic, requiring a careful interpretation of the results. Therefore, a thorough analysis of individual indicator variables plays an important role in our monetary policy strategy, in addition to any role that these variables may have in the forecast. Within the stability-oriented monetary policy strategy, the Eurosystem also takes into account the external value of the euro as an important determinant of the outlook for price stability.
But for an NCB member of the Eurosystem, the micro analyses have a particular importance within the European Credit Assessment Framework if it is recognised as an In-house Credit Assessment System. Those NCBs which run an ICAS (currently Austria, France, Germany and Spain) use balance sheet data for the assessment and prediction of default risk under a set of precisely defined conditions. The ICAS statute is demanding but it is worthwhile because it can play an important role for monetary policy operations. For this purpose, we need to rely on a good methodology, commonly agreed and depending to a large extent on an ability to deliver a sound and solid assessment of non-financial companies. This helps NCBs to fulfil one of their core functions, which is the refinancing of commercial banks and we experience that daily. On this very important subject – the ability to assess credit risk of non financial companies as offering a possibility to expand the amount of eligible collaterals – I took note that several NCBs are about to join the four present ICAS: this is a signal of the  BIS central bankers’ speeches  1  relevance of this mechanism to help the commercial banks to develop their loans and, hence, support economic growth.

Yet, looking back, the crisis also has its silver linings: the painful adjustments that followed prompted governments to strengthen economic fundamentals, enhance banking systems, deepen local bond markets, and build up foreign reserves to cope with potential external shocks. Because of these developments, the region has been able to emerge from the recent global financial crisis relatively unscathed and is now one of the key driving forces supporting the global economic recovery. 5. But we cannot afford to be complacent, as we are now confronted with a new round of challenges in uncharted waters. The unprecedented monetary easing in the advanced economies has led to global excess liquidity. And with the robust recovery of the emerging  BIS central bankers’ speeches  1  markets, there are powerful push and pull factors driving investors to search for yields in developing economies including Asia. From Q3 2009 to Q4 2010, the net capital inflows to emerging Asia1 amounted to $ bn, the largest inflows in recent years. 6. The strong capital inflows and resultant abundant liquidity have led to exchange rate appreciation, fuelled credit growth and driven up asset prices in the region. With output gaps closing, inflationary pressures are accelerating in a number of Asian economies. Capital flows also complicate the macroeconomic policy responses. While exchange rate appreciation and monetary tightening could theoretically cool down the economy, in practice, they may attract even more speculative inflows to profit from interest rate arbitrage and currency appreciation. 7.
31 March 2022  Governor’s speech at the 61st Annual Meeting of the Central Bank of Iceland, 31 March 2022 Madame Prime Minister, other Ministers, Chairman of the Supervisory Board, and other honoured guests: This is my third Annual Meeting as Governor of the Central Bank, but the first one that has taken place in the presence of guests. At the first two meetings, fewer than ten people were present and there was nothing on the tables to quench their thirst but hand sanitiser. Yes, I have twice delivered Annual Meeting speeches to an audience comprising the Prime Minister and the Supervisory Board Chairman and very few others. They are a wonderful audience, to be sure, but it is undeniably more fun to address a full auditorium. But I will take the liberty of saying that I believe those speeches delivered their message effectively. Both of them focused on the COVID-19 pandemic and its implications, and the merger of the Financial Supervisory Authority and the Central Bank. It is hardly surprising that these two topics should have dominated the Bank’s work over the past two years. In addition, the Central Bank turned 60 in 2021, but we were unable to celebrate that milestone because of the pandemic. The pandemic delivered a massive shock to the economy when Iceland’s largest export sector evaporated more or less overnight and unemployment soared to nearly 12%.

We have to accept it as we do any other misfortune. Otherwise, we will find ourselves back in the 1970s. I do not mean by this that Icelandic wage-earners must make sacrifices. No, I certainly do not want Icelanders to have to sacrifice; I want them to have it as good as possible at all times. I am merely pointing out the best way to safeguard the nation’s living standards now, when we must adapt to a changed reality in the global markets and in international relations. And it is obvious. We must all participate in the fight against inflation – even those who stand outside the labour unions. We cannot stand by and watch the corporate sector cut its ties to Icelandic reality as regards developments in wages. The question of how much the Central Bank may need to raise interest rates to maintain stability will only be answered in the wage settlements this coming autumn. Honoured guests: Iceland’s economic position has never been better, no matter how it is measured. In spite of everything, households’ purchasing power is growing, even though inflation has risen. In spite of everything, household debt has not risen discernibly as a share of disposable income. In spite of everything, homebuyers with nominal-rate loans are paying negative real interest for the first time in 40 years.