samchain/econo-pairs-v1 huggingface dataset:
This will help to cool the labour market and contain some of the domestically-driven inflationary pressures that historically have threatened to become more persistent. Concluding remarks  7/8  BIS - Central bankers' speeches  These are the three main arguments of my monetary policy reaction function at present. Developments on these three fronts will shape my policy decision in November. As I have hinted, these three elements are not only important in themselves, but they also interact with and feedback from one another, in ways that can only really be captured by an encompassing analysis. That is why it is valuable and necessary to base our next policy decision on the comprehensive assessment embodied in our November policy round, which will ultimately be reflected in the November MPC forecast. Given the uncertain world and volatile markets we face, November can seem a long time away. At present, I am still inclined to believe that a significant monetary policy response will be required to the significant macro and market news of the past few weeks. But I will see when we get to November how events have evolved in the meantime. As always, my policy choices will be driven by the data and guided by pursuit of the inflation target. And with that, I am happy to take your questions. The views expressed in this speech are not necessarily those of the Bank of England or the Monetary Policy Committee.

While at first read this looks like a rare piece of good news, viewed through the lens of efforts to return inflation to target it is a mixed blessing. Indeed, the association with the mid1970s is not reassuring in that respect. Tight labour markets support wage growth, currently running at rates above those we typically deem as consistent with the inflation target. Crucially, the low unemployment rate reflects a fall in labour market participation to a significant extent. In other words, people are choosing to stop working or looking for work. The reasons for this rise in 'inactivity' are still being explored, but the after-effects of the pandemic on health are probably a key driver. Aside from the impact of long Covid, the backlog of operations and lengthening of waiting lists in the health service owing to the pandemic, the rise in mental health issues, and an increased need to provide at-home care for family members have all weighed on labour force participation. This is an area where we need further work, since the UK appears to be something of an outlier relative to its advanced economy peers. Another supply-side driver of labour market development is migration. Understanding the impact of Brexit and new government policies in the area are key. Demand issues are also now beginning to exert an influence. As the economy slowed through this year, vacancies have turned. Employment has stagnated and is now showing tentative signs of falling.
In addition to the most recent cycle, examples of such behavior include high-yield bond and leveraged buyout lending in the 1980s, and Latin American investment and lending in the mid1980s. Too often, management edicts to reduce risk occur during the latter phase of the credit cycle, after substantial losses have already occurred. Second, I would argue that targeting returns commensurate with risk over an appropriately long time horizon probably is the single most important defense against violent swings in the credit cycle. Individual banks can protect themselves if they recognize when margins become too thin to cover risk by restraining their credit activities at those rates. They can benefit by expanding their credit activities when returns have risen enough to cover risk once again. To limit credit cycle volatility, appropriate risk and return analysis must be practiced widely and consistently throughout the financial system. Third, more attention must be directed at stress testing, the leading technique in assessing the direct and indirect effects of unusual market and economic events. Stress testing is a fundamentally qualitative and judgmental process, typically used in conjunction with more formal, statistical approaches to risk measurement, such as risk modeling. The primary goal of stress testing is to identify scenarios, usually low probability, high-stress events, that could jeopardize the health of a financial institution. Stress testing of market risk exposures is not a recent development. However, the analysis of distinct classes of fixed-income securities all too often occurs in isolation.

Governance may be seen as the manner in which power is exercised in the management of a country’s social and economic resources for development. We all know that good governance involves setting adequate policies, programs and regulations, which then have to be translated into legislation. As I often say, sustainable development hinges on the consistency of economic policies – there is no substitute for consistent, sound and stability-oriented economic policies. In this context, institutions are central to the way a country is governed and these are the formal and informal rules in a society. As the Nobel Prize winner Douglas North pointed out “the formal rules are set by the state through laws and regulations, while the informal rules come from the culture, history and experience of each society”. Only in the last 10–15 years most economists have discovered good governance – with its four pillars: transparency, accountability, predictability and participation – as a major determinant of economic growth. Thus, economic governance implies the need to ensure stable, transparent and predictable rules that encourage competition and fair access to public services. It is achieved through a country’s public and private sector institutions and the civil society. Moreover, the recent international crisis has underscored the need for an in-depth reform of economic governance at both European and global levels.
An investment boom preceded each panic – the earlier in copper and the later in housing – with much of the credit being funded by sources outside of any existing liquidity protections. When the bubbles began to deflate and prices began to fall, loan defaults quickly developed precipitating funding runs on the institutions involved in extending this credit. What seemed like large liquidity buffers by individual firms were quickly drawn down. Funding withdrawals precipitated asset sales, which put further downward pressure on asset prices. The resulting credit contractions adversely affected the real economy, setting up an adverse feedback loop that exacerbated the initial losses. 2  2  Walter Bagehot, 1873. Lombard Street. London: Henry S. King and Co.  BIS Review 92/2010  Given the parallels between the events of 1907 and 2007 and, more importantly, the similarities of the lessons learned from those episodes, I believe the most instructive name for our latest financial crisis is the “Panic of 2007”. In the rest of my remarks, I will explore in greater detail the factors behind the panic, as well as the responses by the Federal Reserve. The first question to explore is the extent to which the financial system had evolved over the past several decades. 3 Over this period, demand deposits lost their market share to money market mutual funds, which, while considered safe, are not guaranteed like deposits. This made it increasingly difficult and less profitable for banks to fund loans on their balance sheets using deposits.

One name that has gained popularity is the “Great Recession”, which is dated as beginning with the bankruptcy of Lehman Brothers on September 15, 2008. This name conveys both the severity of what occurred, as well as the calamity of what was avoided. The contraction in real output in the six months following the demise of Lehman Brothers exceeded in size any other post World War II recession – in that sense, it was a great recession. However, aggressive monetary and fiscal policy actions both domestically and abroad were successful in preventing a complete meltdown of the U.S. and the world economy. In that sense, the name also emphasizes what the crisis was not. However, the name tends to focus one’s attention too much on the effect and not the cause of the crisis. An alternative name is the “Panic of 2007”, which is dated as beginning with the announcement by BNP Paribus on August 9, 2007, of its suspension of redemptions for three of its investment funds. This name stresses the financial crisis as the precipitating event leading up to the severe decline in real economic activity slightly more than a year later. The name conveys that at its very basic level, the crisis was a form of a banking panic. The parallel to the name “Panic of 1907” is also a reminder to us that history has a way of repeating itself unless we learn and apply its lessons well.
The first round effects of exchange rate pass-through are expected to continue in the short term. Inflation in CPI excluding food, energy and tobacco items remained flat over the previous quarter and remained at 4.8 percent, confirming that the rise in inflation can be mostly attributed to factors beyond the control of monetary policy (Figure 5). The recent rise in core inflation indicators has reinforced the risks related to second-round impacts of previous shocks. Figure 5: Main Inflation Indicators and Policy Rates 18  11  17  10  16  9 8  15  7  14  6  13  5  Policy Rate H (right axis) H exc. Processed food (right axis)  12 11  4 3 03/08  12/07  09/07  06/07  03/07  12/06  09/06  06/06  03/06  2 12/05  10  H: CPI excluding unprocessed food, energy, alcoholic beverages, tobacco and gold. Source: TURKSTAT, CBT. 4  BIS Review 62/2008  Dear Members of the Press, Elevated prices of crude oil, food/agricultural products and other commodities continue to exert inflationary pressure (Figure 6). As a result, inflation has recently been rising worldwide (Figure 7). Inflation in developed economies edged up in the last quarter of 2007, while emerging economies with inflation targeting have faced an upward trend since June 2007. By the end of the first quarter annual inflation in Turkey was 9.2 percent, which is below its end2006 level of 9.7 percent.

Figure 1: Annual CPI Inflation and Target Path 12 11 10 9 8 7 6 5 4 3 2 1 0  12/08  09/08  06/08  03/08  12/07  09/07  06/07  03/07  12/06  09/06  06/06  03/06  12/05  Annual CPI Inflation Target Path Uncertainty Band  Source: TURKSTAT, CBT. Prolonged increases in food, energy and commodity prices have recently led to upward pressure on headline inflation and in turn to upward revisions in inflation forecasts in many countries across the world. Turkey is not an exception in this regard, as the deviations of inflation from our forecasts can be mostly attributed to these factors. For instance, our  BIS Review 62/2008  1  forecasts in the October 2006 Inflation Report suggested that inflation would converge to the 4 percent target at the end of the first quarter of 2008. The forecast was based on a scenario in which food inflation moderated to levels comparable with medium term targets and oil prices remained stable at 60 USD per barrel. However, oil prices continued to rise and averaged around 100 USD per barrel in the first quarter of 2008. Moreover, annual food price inflation has continued to remain at elevated levels, reaching 13.4 percent in March. As a consequence, 6.13 percentage points of the 9.15 percent annual CPI inflation in March came from food and energy items (Figure 2).
In this scenario, the combination of slower growth, smaller surpluses in Asia and higher risk premia could move global interest rates higher, increasing the burden of corporate and household debts and challenging the creditworthiness of some sovereigns. Contrary to what you might have heard, it isn’t easy to win a trade war. If the UK has been somewhat more inwardly focused of late, it has been for good reason. In many respects, Brexit is the first test of a new global order and could prove the acid test of whether a way can be found to broaden the benefits of openness while enhancing democratic accountability. Brexit can lead to a new form of international cooperation and cross-border commerce built on a better balance of local and supranational authorities. In these respects, Brexit could affect both the short and long-term global outlooks. It is in the interests of everyone, arguably everywhere – from Frobisher’s grave to Frobisher’s Bay - that a Brexit solution that works for all is found in the weeks ahead. 30  While economic, policy and geopolitical uncertainties are very high, several market-based risk metrics are not. Credit spreads, the VIX and equity implied volatilities are below the 50th percentile of their historic distributions, as is equity risk premium in the US. Despite recent volatility, high-yield corporate bond spreads also remain below pre-crisis averages.

I will structure my observations around four points: •  First, the factors that have led to the crisis and in particular how the euro area became engulfed first in the global financial crisis and then in the sovereign debt crisis;  •  Second, the crisis response in the euro area, including both monetary policy as well as other policies;  •  Third, the key lessons we have learned from the global financial crisis in the euro area and in particular the institutional weaknesses that were uncovered during the crisis;  •  Finally, I will touch on institutional reforms at the level of the euro area and the European Union at large, which have also contributed, in my view, to an improvement of the foundation of our monetary union which is, we hope at least, the harbinger for a better performance in future. Work in this area is still in progress, and for that reason I will then conclude by sketching the challenges that still lie ahead of us. 1. The factors leading to the crisis  As I have argued on previous occasions, it might be useful to think about the development of the global financial crisis and subsequently the euro debt crisis in the last five and a half years as the gradual discovery of an iceberg. As you probably already know, because the density of ice is lower than the density of sea water, normally only one-ninth of the volume of an iceberg is above water.
The Riksbank’s steering system is constructed to influence the shortest market rate, the overnight rate. This is the rate at which the banks manage their daily liquidity surpluses or deficits with each other. Interest rates for somewhat longer maturities are to a large extent determined, as you know, by expectations of future short-term interest rates. The idea is that by steering the overnight rate we also can affect interest rates further out on the yield curve. How do we steer the overnight rate in practice? First of all we lay down an upper and a lower limit – an interest rate corridor – for movements in the overnight rate. This we do via our standing facilities, which enable the banks to borrow or deposit funds overnight at the repo rate plus/minus 75 basis points. In addition, to ensure that the overnight rate is close to the repo rate, we perform a finetuning operation, if necessary, on a daily basis. For this operation, at the end of each bank day we are prepared to lend funds at the repo rate plus 10 basis points or to accept deposits at the repo rate minus 10 basis points. Our aim is that after the fine tuning, the banking system as a whole will be balanced. That means that we only lend the equivalent of the banking system’s net borrowing requirement or accept deposits for the equivalent of the banking system’s net investment requirement.

If the financial infrastructure does not function, payments and securities transactions cannot be made, which would bring the economy more or less to a halt. It would also prevent the Riksbank’s interest rate from exerting an impact on the economy. This means that the financial infrastructure and the ongoing changes in securities markets are relevant for the Riksbank’s two primary functions, namely to safeguard both financial stability and price stability. It is therefore important that we closely follow developments in these respects. Increased integration As many of you are already aware, major changes are currently in progress in the securities markets and the financial infrastructure. In recent years we have seen a number of tendencies whereby trading in financial instruments is becoming more integrated. Such tendencies have also been evident recently in clearing and settlement – the processing of securities transactions that follows the trade as such. 1 In a world conditioned by further globalisation, increased competition and advances in technology, companies use mergers and acquisitions to adjust. In the field of financial instruments, the creation of NASDAQ OMX Group in February 2008 has strengthened the links between Nordic, Baltic and American exchanges. The driving force behind this merger is primarily economic in that it confers considerable economies of scale. 1  Clearing involves balancing mutual claims and liabilities. Settlement involves the transfer of money and securities between transacting parties. BIS Review 153/2008  1  The changes in securities markets are also connected with regulations.
In the case of Thailand, headline inflation peaked at 9.2% in July last year, but has fallen dramatically to -0.4% in January. While it is natural for forecasts to be revised in light of new developments and information, a concern arises that globalization is likely to have changed the various relationships in the economy. This is particularly timely now, when fear and uncertainty takes over rational behaviour. And if our models are still based on assumptions which have not incorporated these changing relationships, then we are likely to make systematic errors in our forecasts. As a result of this volatility in inflation and the marked slowdown in global output, many central banks have had to reverse their tightening cycles – originally conducted to tackle inflationary pressures, while others have pursued an aggressive easing of monetary policy to shore up growth and fight off prospects of deflation. Many countries, including Thailand, had to do both. This in turn, also becomes a concern for the central bank if frequent revisions or the abrupt reversal of the central bank’s monetary policy stance affects the public’s perception of the central bank’s credibility. As a result of the speed and magnitude of deterioration in economic conditions, central banks across the globe have pursued extremely aggressive monetary policy easing, with the intent of actively supporting their domestic economies against the global slowdown. This situation has led us to the second challenge to monetary policy – namely the challenge to its effectiveness.

The imbalances manifested themselves in huge trade surpluses and an accumulation of foreign exchange reserves in the countries which relied on export-oriented growth – including those in the Asian region. They were reflected in the dollar revenue which was subsequently reinvested in US financial markets – which in turn helped to finance the US saving deficit, permitting these imbalances to remain uncorrected for a prolonged period of time. And as a result, asset price bubbles were also allowed to persist for a prolonged period as well. BIS Review 33/2009  1  All was well as long as everyone continued to grow. However, as emerging markets opened up, global demand, and particularly demand from growing economies like China and India, drove up the prices of oil and other global commodities. Many economists began to predict a structural shift in global demand and changing dynamics of global inflation which would effect domestic prices and make inflation higher and more persistent. 3. Coping with the global financial crisis  At the same time, problems were brewing on the financial side in the advanced economies. I will not lay out the causes of the financial crisis here, as that has been discussed widely elsewhere. In a nutshell, the slowdown in the US housing market, coupled with a mix of troubled banking practices, regulatory blind spots, and absolute faith in the market mechanism, among other things, led to a financial crisis in advanced economies.
01.07.2019  “Banks and society. Looking to the future” Círculo Financiero de la Sociedad Económica Barcelonesa de amigos del país Margarita Delgado Deputy Governor  Good evening. I would like to thank Fundación La Caixa for their kind invitation to me to take the rostrum today at the Círculo Financiero. It is firstly an opportunity to address an eminently distinguished audience. But it also allows me to visit Barcelona again, a city I know very well from my time as a bank supervisor and to which it is always a pleasure to return. You know better than me that Círculo Financiero has, throughout its long history, always offered a forum for open and frank debate on current topics. It has sought to tackle, from a constructive and European-oriented approach, the problems and difficulties we face as a society. Admittedly, the challenges before us at present are most significant ones. But it is no less true that Spain, throughout the history of this institution, has experienced and overcome even more turbulent times. Each of these convulsive periods was seen by our society as a crisis. Crisis and change The word “crisis” is from the Greek. Despite the adverse emotional reaction we all feel on hearing the word, the Greek term does not necessarily have a negative connotation. The root of “crisis” means “choice”, “dispute” or “decision”. Originally, then, the word “crisis” necessarily implied a change. But, above all, it reflected the need to act resolutely and decidedly in the face of such a change.

Public opinion shifts rapidly from criticising banks for their mistakes – frequently, for the mistakes “inherited” from banks that disappeared some time back – to criticising them for not sufficiently easing the way for  4/13  credit to reach economic agents; indeed, for the risk of financial exclusion stemming from potential branch closures. Like the song, it would seem we can’t live with or without them. But the truth is, with or without criticism, the role of banks remains as essential today for our economy as it was 20 or 30 years ago. However, debate has arisen over the future role of banks, set against the emergence on the scene of the so-called Fintech. This can be seen as a threat or as an opportunity. I believe it entails both. But in any event, banks must evidently adapt their business model to technological change, as Gonzalo so rightly said. If instead of looking at the small, innovative and nimble Fintech, we assess the potential effect that the irruption of one of the so-called Big Tech may have on the system as a whole, the debate takes on a systemic dimension. In this connection, the recent announcement of the launch of the “Libra” project, the virtual currency sponsored by Facebook, has potentially systemic implications. These are so serious that supervisors, central banks and credit institutions must all evaluate the possible consequences. Evidently, we must be sure that the project will not compromise the integrity of payment systems and the stability of the system as a whole.