samchain/econo-pairs-v1 huggingface dataset:
The task of explaining monetary policy and the risks to Swedish inflation prospects one to two years ahead is an important aspect of our operations and in some ways is a precondition for our ability to attain our objective of maintaining price stability in the Swedish economy. Similarly, we publish regular reports that comment on stability issues in the Swedish financial system so as to ensure a safe and efficient payment system. But sometimes the Riksbank also needs to look beyond the current monetary policy situation or conditions in the country’s banks and comment on issues of a longer-term nature. Here, the Bank may give its views on the labour market, on competition in trade and industry or on the long-term conditions for growth in the Swedish economy. In light of this, the issues relating to the Lisbon agenda are something the Riksbank has been following with great interest. Potential growth plays a key role for monetary policy Long-term potential growth in particular also plays an important role in the Riksbank’s monetary policy assessment. Economic growth essentially depends on two factors - how much we work and how productive we are. Thus, in somewhat simplified terms, we could say that it is efficiency gains and growth in the working population that enables us to increase consumption. This is what we usually refer to as the potential growth rate, that is, the rate at which the economy can generate new economic resources without giving rise to shortages or surpluses.

The US is one example of a country that despite weak domestic saving attracts capital from abroad, thus helping to hold up investment. In turn, investment in new technology forms the basis for productivity growth, thereby making it important for potential growth. The structure of the tax system is also of significance in this area. Swedish taxes on capital are not appreciably higher than the EU average. Their distribution is distorted, however, with high wealth tax and capital gains taxes for individuals, and low taxes for institutional and foreign investors. This distorted distribution of the tax burden may come to play a more important role for Sweden’s  4  BIS Review 45/2003  attractiveness, in terms of how both Swedish and international investors decide to allocate their investments between Sweden and abroad. As regards the functioning of the financial markets, the unfortunate truth is that this is also a neglected area in many countries on the Continent. In some respects Sweden has progressed further than the euro area countries in terms of improving the efficiency of the financial system. After the period of deregulation in the 1980s the progress of the Swedish financial market has been well in line with what has happened in the Anglo-Saxon economies in the US and UK. As a result, the equity market has become more important as a source of financing and firms have become less dependent on banks. Meanwhile, banks have focused to a greater degree on providing credit and financing opportunities to individuals.
The level of investment is assumed to increase somewhat in 2006 and remain high next year, before declining slightly the following year when Ormen Lange and Snøhvit are scheduled for completion. Continued high oil prices are expected to contribute to high investment both in exploration and in fields in operation in the years ahead. Information from our regional network suggests that petroleum investment is providing considerable impulses to activity in Norway’s coastal regions. According to the network, suppliers to the petroleum industry are expecting continued strong growth over the next few months. Statistic Norway’s investment intensions survey for oil and gas activities confirms the impression of positive expectations for 2006 and 2007. There are prospects for strong growth in the Government Pension Fund - Global. Given our assumption for oil price developments ahead (oil futures), spending in line with the expected real return on the Fund implies that the structural, non-oil deficit may increase by close to NOK 15 billion at 2006 prices in both 2008 and 2009. With a period of strong expansion in the Norwegian economy, somewhat lower petroleum revenue spending will be in line with the fiscal rule. Our projections are based on the assumption that fiscal policy will generate some stimulus to total demand and output in 2008 and 2009, but somewhat less than the expected return on the Fund would imply. Economic growth in Sweden, the UK and the euro area is high. Economic developments in China and India remain strong. GDP growth in the US and Japan has slowed.

One industry that reports a very solid first half year is the fish farming industry. This industry is particularly important in Hordaland, which alternates with Nordland in being the county that produces the most farmed fish. Prices for fresh farmed salmon rose sharply at the beginning of the year, generating solid earnings in the industry. Prices have fallen somewhat since June but are still higher than they have been in recent years and far higher than unit productions costs. Our contacts in region South-West also report that the market outlook for the next six months is favourable in all sectors. Service industries are most optimistic about growth. In this year’s highestgrowth industries, oil and gas and building and construction, growth is expected to be slightly lower. Most sectors expect an increase in investment. In the local government and hospital sectors, the investment level remains relatively stable. Employment is rising in most sectors in this region. Seven of ten enterprises report that labour shortages are limiting their possibilities for expansion. The situation is particularly demanding for manufacturing and building and construction, as well as for some parts of the public sector. More than half of the contacts plan to increase their workforce during the next three months. The labour market is tightening further in the region. This is reflected in falling unemployment and rising wage growth. A number of sectors now expect higher annual wage growth in 2006 than indicated in the previous round of interviews.
All institutions that have applied for aid from the FROB have sent their recapitalisation plans to the Banco de España, and the work on the valuation of these institutions, which will be set by independent experts, is already under way. Of the 13 institutions or groups of institutions that need to reinforce their capital, the four banks will fund themselves on the market, while the savings banks have submitted various strategies, which initially or ultimately include the possibility of obtaining the necessary funds from the FROB, which acts as a backstop that assures the markets that all Spanish institutions will have a core capital ratio of at least 8%. Now, how and when Parliament has decreed, the final steps to conclude this far-reaching financial restructuring process must be taken. In sum, Spain may be said to have taken what are to all intents and purposes historic measures to leave its banking system in a position to meet solvent demand for credit when such demand picks up. Recovery should come about sooner if the pertinent reforms are  2  BIS central bankers’ speeches  adopted to lift the obstacles to job creation and to allow our massive jobless figures to begin to be reduced. I shall close here, since today you are going to have the good fortune to listen to JeanClaude Trichet, who will surely offer you a much fuller perspective on the response to the international and European financial crisis.

It has been a pleasure and a privilege for me to cooperate with him as a member of the ECB Governing Council over the past five years, during times of great complexity for monetary policy and financial stability in the euro area. In this period I have seen at first hand Jean-Claude’s personal and professional qualities. He has shown he has the right blend of firmness and pragmatism required to take difficult decisions at the worst junctures of the crisis. And he also possesses the leadership and communication skills needed to convey a long-term vision of the European project and the central role that the ECB plays here. During Jean-Claude Trichet’s presidency, the ECB Governing Council has displayed the resolve needed to deploy all the instruments available to the common monetary policy and to take timely decisions that help ensure the goal of price stability in the medium term is achieved. Since the creation of the ECB, average inflation has stood just below 2% and inflation expectations have held stable. The extraordinary scale of the financial crisis has put to the test the responsiveness of the Eurosystem in general, and of Jean-Claude Trichet in particular. Since the start of the crisis a series of bold and well-directed decisions have been adopted. And these have contributed notably to restoring the monetary policy transmission mechanism, which had been seriously damaged, and to preventing an unprecedented collapse of the financial system with incalculable consequences.
These include insurance companies, mutual funds and pension funds which achieve important economies of scale through pooling small savings, diversifying investments and monitoring market information. Institutional investors raise the level of professionalism within markets through requiring better information and increased transparency. Financial infrastructure: Capital market participants nearly unanimously agree that they should not engage in underwriting, trading or asset management activities in the absence of a secure legal and regulatory environment. Foreign investment funds usually cannot go into a market that lacks adequate legislation and oversight. Ladies and Gentlemen, many organized exchanges operate as self-regulatory organizations (SROs) that sometimes do not meet internationally recognized norms for transparency and disclosure. Although exchanges perform a self-regulatory function, most developed financial systems additionally have a securities exchange commission-type institution that provides an additional layer of oversight. Investors look to these organizations to safeguard the markets through establishing minimum standards of capitalization, registration of securities and market participants, timely and material disclosure and effective enforcement. In addition to the legal and regulatory framework, the financial infrastructure should include a non-bank payments system for the organized exchanges. Commonly called clearance and settlement within a central securities depository, these clearing houses depend importantly on legislation enabling their establishment and on the clarification of legal concepts such as netting and the treatment of guarantees in bankruptcy for their effective operation.

It is crucial that investment in equipment should gain in momentum and that its greater vigour be accompanied by more expansionary, export-led net external demand. The improvement in these components would then provide for a situation in which the necessary moderation in household spending, especially on house purchases, did not lead to a loss of dynamism. It should not be forgotten that some of the factors behind the buoyancy of expenditure may tend to lose steam or even disappear The most patent case here is that of the prolonged expansionary influence exerted by lower interest rates. The current scenario of exceptionally low interest rates is the result of a very particular economic situation at the European and international level. And although EMU membership ensures moderation in rates, it is likely these will return to more neutral levels as the recovery in the area takes hold. Nor is it conceivable that the exceptional intensity of employment generation per unit of output in recent years can become a permanent feature. Probably, once the labour market has been fully adjusted to a situation of price and wage stability and to a more flexible regulatory framework, the relationship between job creation and growth in the economy will resume a pattern more in step with long-term trends.
This was due to higher annual inflation rates for the following subgroups: Clothing and footwear by 11.3%, [9.9%] 4 ; Furniture and household goods 11.5%, [10.1%]; Transport and communications 15.3%, [11.1%]; and other goods and services 14.1%, [12.8%]. These developments reflected pass-through effects of the Kwacha exchange rate depreciation by 4.8% over the 12 month period, coupled with higher transport fares and the upward adjustment of electricity tariffs by an average of 25.6% during the period under review. Non-food inflation contributed 6.3 percentage points to the annual overall inflation outturn. 4  6  The numbers in square brackets are for June 2010. BIS Review 148/2010  Broad money and domestic credit 5 Preliminary estimates indicate that growth in broad money (M3), comprehensively defined to include foreign currency deposits, was 7.2% in the third quarter of 2010 down from 13.3% as at end-June 2010, and was above the 4.0% projected quarterly growth rate. In absolute terms, M3 is estimated to have increased to K17,898.9 billion from K16,698.3 billion in June 2010. The outturn in M3 was largely due to the increase in both NDA and NFA. NFA edged up by 12.2% mainly on account of a 15.7% increase in gross international reserves to US $ million as at end-September 2010. The increase in NDA was mainly due to the expansion in lending to the Government. Excluding foreign currency deposits that increased by 30.2% (June 2010, fell by 5.1%), money supply declined by 2.0% compared to the 22.9% growth recorded during the second quarter of 2010.

During the quarter ending September 2010, developments in commercial banks’ nominal interest rates were mixed. The weighted average lending base rate (WALBR) continued its downward trend, falling to 19.8% from 20.9% in June 2010. Similarly, the average lending rate (ALR) fell marginally to 26.8% in September 2010 from 27.9% in June 2010. However, the 30-day deposit rate for amounts exceeding K20 million and the average savings rate (ASR) for amounts above K100,000 remained unchanged at 5.6% and 4.7%, respectively. Real sector developments Developments were favourable in the real sector during the reviewed quarter. This was reflected in increased output of metals (copper & cobalt), beer, soft drinks and cement. Further, international arrivals also increased during the period under review. Agriculture The stock of maize grain held by major millers in the country rose by 124.6% to 101,807.0 mt as at 29th September 2010 from 45,336.7 mt as at 30th June 2010. In terms of holdings by province, Lusaka contributed 51,117.1 mt (50.2%), Copperbelt 26,644.0 mt (26.2%), Southern 19861.0 mt (19.5%), Western 4,050.0 mt (4.0%), and Northern 35.0 mt (0.03%) respectively, while Eastern province accounted for 100.0 mt (0.1%). Data on maize stocks from Central province was not available at the reporting date. Mining During the reviewed quarter, copper output increased by 16.4% to 232,554.87 mt. This output was also 30.5% higher than the 178,140.1 mt of copper produced in the third quarter of 2009.
Together with the measures that the National Debt Office have taken, the Riksbank's lending of both Swedish krona and US dollars contribute to a general strengthening of liquidity primarily in the Swedish credit markets, thereby also creating conditions for the markets to return to more normal conditions and allowing financial stability to be maintained. Second of all the Riksbank has – as I just mentioned – also provided special liquidity assistance to Kaupthing Bank Sweden. This loan is against collateral and with an interest rate that is above normal lending costs. Even if this measure is aimed at an individual bank, it should also be viewed as an initiative to safeguard financial stability and to maintain confidence in Sweden's entire credit and payment system. The decision is based on the assessment that although the bank is solvent, it is unable to perform its obligations without  4  BIS Review 125/2008  liquidity assistance. What happens next with Kaupthing Sweden is mainly a question for the bank's owner, the Icelandic state. The liquidity support to Kaupthing differs in many regards from the Riksbank's other measures. In this case the support is aimed at an individual institution and not at money market participants in general. In Kaupthing's case the point was to enable the bank to obtain any funding whatsoever and thereby continue to exist.

And just for the sake of clarity, let me add that this view is in no way related to any such situation being present in Sweden. This is something that the Riksbank has advocated for a long time. In light of what happened in the United States we should also consider regulation of institutions that do not take deposits from the public. Such institutions are often the subject to weaker supervision and regulation, which has been justified because they are not as important for financial stability. But as the developments in the US investment banks clearly illustrate, even such institutions can substantially shake up the financial system. Given the global scope of the crisis it is important to coordinate both short-term and longterm measures among countries. If nations try to find separate solutions in this type of situation, the costs for handling the turmoil could become even greater than what they otherwise would have been, even for individual countries. Therefore, in all of the issues mentioned here, much can be won through international coordination and harmonisation. Yet another example of an issue that requires international coordination is how to organise supervision and crisis management within the EU. Today several banks engage in significant operations in several EU countries, while the responsibility for supervision and crisis management is still national. Under such circumstances there is a risk that coordination problems and conflicts of interest could arise between countries, which obviously does not benefit financial stability.
I am therefore now looking forward to first talking about what has recently affected interest rate policy on a more fundamental level and then about the factors behind the decision taken in September. High inflation and rising interest rates The Riksbank is to ensure that we keep inflation in Sweden at a low and stable rate. We have indeed experienced a long period with a fairly low rate of price increase, approximately 1.6 per cent on average since the inflation target was announced. However, over the past year inflation has been higher. In August the rate of increase in consumer prices was 4.3 per cent. This is the highest inflation rate in almost 15 years. Given this, it is perhaps not surprising that expected inflation has also risen in the short term. But expectations of inflation several years ahead are now also clearly above the Riksbank's target of 2 per cent. It is therefore not surprising that many people are concerned. As inflation has risen, the Riksbank has raised its interest on loans to the banks, the repo rate. This is now 4.75 per cent. The banks’ lending rates to companies and households are higher and have also risen. They have risen more than the Riksbank’s rate increases. This is in turn linked to the uncertainty in the financial markets, which has increased the banks’ borrowing costs around the world. At the same time, the economic activity in the world in general has weakened, which leads to a decline in exports for Swedish companies.

12  Interpreting these trends is not straightforward. Household surveys may reflect consumers’ assessments of the most frequently purchased items, for example, rather than the whole CPI basket. And financial market measures reflect not only expectations about future inflation, but also investors’ required compensation for inflation risk – the inflation risk premium – and, in the UK, the wedge between CPI and RPI inflation rates. BIS central bankers’ speeches  5  4. What if inflation is slow to return to target abroad? Protracted global weakness could heighten the challenge of returning inflation quickly to target in the UK. That’s because weak global conditions would tend to push down on the equilibrium interest rate that would maintain demand in line with supply and inflation at the target. This equilibrium rate has likely been falling for the last three decades and turned sharply negative in the downturn.13 This meant central banks had to turn to unconventional policy tools to stimulate their economies in order to return inflation to target. In the cases of the UK and the US, these measures have been effective in supporting domestically generated inflation. Although the equilibrium rate might be turning positive in the UK as domestic headwinds have abated, it’s likely still to be negative in many countries, reflecting an excess of saving over investment, in particular in the euro area.
Like public companies, and  BIS Review 102/2000  6  no doubt many of you here who are directors of public companies, we are working hard to ensure full compliance with the Turnbull report. Personnel policies Finally I would like to mention the changes we have made to our personnel policies. I have already indicated that the changes imposed by the 1997 proposals, together with the changes brought about by a changing environment, placed a heavy demand on the flexibility of our workforce. We have needed to increase the analytical capacity of the Bank, in part by additional recruitment of economists. Indeed we are among the largest employers of professional economists in the country. We have also substantially upgraded our programmes under which individuals are able to go back to full-time education supported by the Bank to obtain the Masters, and in some cases Doctorate degrees, that we need to keep us at the forefront of thinking on economic and financial issues. We have reorganised the rank structure within the Bank. For some time, we had two broad categories of staff: officers and officials. Counter-intuitively, the officials were senior to the officers, rather like the Civil Service of many years ago when Administrative Grades were senior to the Executive Grades. We have merged the officers and officials grading into one structure, taking out several layers while we were at it - although I would have to admit that the Bank remains a formidable hierarchy!

This is an area where the private sector has made enormous advances in recent years, much of it strongly encouraged by the banking supervisors. Risk management has become more sophisticated with more differentiation between risks: the separation of credit and market risk; the recognition of operational risk as a distinct category; and the importance of reputational risk. Notwithstanding that the nature and size of our operations are different and smaller than many private sector institutions, the Bank is exposed to many of these same risks. In managing these risks, we have wanted to ensure that our practices are consistent with best practice in the private sector, to the extent that this is applicable to a central bank. We have invested heavily in technology to allow management of the risks on a consolidated basis and where appropriate in real time. We have also instituted a number of organisational changes, setting up an Assets and Liabilities Committee which I chair and which reviews at senior level the management of our balance sheet; and a Risk Monitoring Department (based in part on the Middle Office model of the private sector), independent from our banking line management. Above this, like public companies, we have a number of Board sub-committees, and in particular an Audit Committee, taking reports from the Internal and External Audit, looking carefully at our internal systems and controls and our policies and processes for management of the main financial, operational and reputational risks.