samchain/econo-pairs-v1 huggingface dataset:
But the risks surrounding the euro area remain tilted to the downside. In particular, the outbreak of the coronavirus and its potential effect on global growth add a new layer of uncertainty. The modest growth performance of the euro area economy is also reflected in subdued inflation 1/3  BIS central bankers' speeches  dynamics. According to Eurostat’s flash estimates, headline inflation increased to 1.4% in January, up from 1.3% in December 2019, reflecting mainly higher energy and food inflation. Measures of underlying inflation are subdued, although they have mildly increased from earlier lows. Wage growth remains resilient and broad-based, and is expected to shore up inflation in the upcoming months. With the decline in unemployment and the tightening of labour markets, labour cost pressures have strengthened. Recent data on negotiated wages continue to signal robust wage growth, which is expected to gradually push up underlying inflation. However, the weaker growth momentum is delaying the pass-through to inflation, as firms appear to be absorbing wage rises in their profit margins rather than passing them on to customers. While survey-based long-term inflation expectations in the euro area have remained anchored at levels of at least 1.7%, market-based measures of long-term inflation expectations have stagnated at levels that are not consistent with our medium-term inflation aim. Overall, inflation is expected to increase, supported by the ongoing expansion, the solid wage growth and our monetary policy measures.

Indeed, the unfolding of our monetary policy measures will ensure that financial conditions will remain very favourable, shielding the economy against the external headwinds and laying out the conditions for the build-up of domestic price pressures. At the same time, we are attentive to the possible side effects of the present monetary policy measures. These need to be carefully and continuously monitored. The ECB strategy review In January, the Governing Council decided to launch a review of the ECB’s monetary policy strategy. After more than 16 years, it was time to conduct a thorough review taking stocks of the profound structural changes that have intervened since the 2003 strategy exercise, and reflecting on what these changes and new trends mean for our framework. This process is expected to last one year and it will be conducted by the Eurosystem and the ECB staff. We will also reach out to academics, Members of Parliament – including the European Parliament – representatives from the civil society and business, and seek the opinion of financial market participants on selected issues. The scope of the strategic review will be comprehensive. That means that we will look at the quantitative formulation of price stability, together with the approaches and instruments by which price stability is achieved. We will also reflect on how other considerations, such as financial stability, employment and environmental sustainability, can be relevant in pursuing the ECB’s mandate.
In my view there are two main areas today where this applies: first, ensuring that banks retain the incentives to lend in markets where to all intents and purposes they are irreplaceable, namely for SMEs; and second, ensuring that they have capacity to do so. Ensuring that banks’ retain incentives to lend Ensuring that banks retain the incentives to provide an elastic supply of credit to SMEs involves a variety of issues, but the priority in the current environment is addressing the factors that could drive unwanted adjustment in the sector: in particular, the cyclical, legacy and regulatory factors I described above. Cyclical factors matter for banks’ incentives because the longer weak demand conditions persist, the greater the risk that banks will shrink their balance sheets more than is necessary. Thus, a stronger recovery with stronger credit demand is a key part of repairing the bank lending channel. Achieving this means economic policies must do their utmost to bring the economy back to potential as quickly as possible, by strengthening both supply capacity and aggregate demand in the economy. As this is now high on the EU policy agenda, I will not dwell on it today. In terms of legacy factors, the main issue today is dealing with non-performing loans (NPLs).

The international financial architecture as it was before the crisis lacked appropriate tools to deal with volatility in global capital flows and to prevent crisis contagion. This was an incentive for emerging countries to self-insure against global liquidity  2  BIS Review 93/2010  shocks by accumulating international reserves or protect themselves through capital flows control, both distortive types of protection. Reserve accumulation is costly to emerging economies as they have to restrain consumption and forego profitable investment opportunities in order to buy the low-yield assets that usually constitute reserves. It also has global consequences. For those emerging market economies that ran a current account surplus to accumulate reserves, the process has contributed to current account imbalances. This is why finance has an important role to play to help these economies effectively deal with capital volatility. A lot has already been done by G20 countries and international institutions since the beginning of the crisis. Central banks of large advanced countries have set up swap arrangements with some emerging countries. The International Monetary Fund has created a precautionary lending facility: the Flexible Credit Line. A general SDR allocation of USD 250 bn has been agreed in the London summit of April 2009 and out in place. However, there is still scope for improvement and further work is currently being done to improve global financial safety nets.
Lessons for monetary policy With regard to monetary policy, in many respects recent events have served to confirm the approach adopted by the ECB since the outset of Monetary Union in 1999. Most fundamentally, the primacy of price stability as the objective of monetary policy has been confirmed. Indeed, at times of financial stress, the credible maintenance of price stability becomes even more important. Were the anchoring of inflation expectations to weaken, financial market tensions would intensify further and corrective measures would prove less effective. Moreover, our recent experience of financial crisis – with its roots in the evolution of bank balance sheets, and thus monetary and credit developments – has vindicated in my view the importance attached by the Governing Council to a close and regular monitoring of the monetary data. In the design of the ECB’s monetary policy strategy, it was always foreseen that the close monitoring of monetary developments would provide a framework for policy makers to consider asset price developments and potential misalignments. Responding to monetary and credit dynamics as part of a comprehensive assessment of the risks to price stability in the medium term implies that interest rate decisions will tend to “lean against” accumulating financial imbalances and asset price misalignments. Recent research provides a vastly enriched framework for conducting such monitoring in a systematic fashion, and offers a real possibility that asset price disequilibria and associated financial distress may be identified at an early enough stage for corrective measures to be taken by the policy authorities.

For instance, organising this forum in Bucharest might be an opportunity for us to persuade our guests to get a flavour of the Romanian wines. As far as the Czech beer is concerned, Romanians do not need much convincing – they are already into it. I do wish you all excellent and productive discussions. Thank you! 2  BIS central bankers’ speeches
BIS Review 6/2007  1  The first two approaches mean that a particular path for the development of the policy rate is taken for granted by the central bank when making its inflation forecasts. The latter approach instead means that the central bank makes its own assessment of what might be a reasonable future development in the policy rate at the same time as it makes the inflation forecast. The assumption of a constant policy rate has been the most common approach, although the trend at present is for the central banks to be clearer as to how they envisage future interest rate developments. Several central banks have changed over to basing their inflation forecasts on market expectations of future developments in the policy rate. When the inflation forecasts are published, there may also be a comment, phrased in general terms, on how the bank views market expectations. So far, only a few central banks have taken the step of publishing their own forecasts for their policy rates. Arguments for and against own forecasts for the repo rate There are currently discussions, both in academic research and in central bank circles, as to whether it is appropriate for central banks to publish their own forecasts for the policy rate. In a moment, I shall describe some advantages and disadvantages of such an approach. At the same time, one must remember that there are a number of advantages and disadvantages to all of the approaches I mentioned earlier, and these must be weighed against one another.

4  BIS Review 6/2007  economy was in a situation where inflation deviated from target. This would mean that when we conduct our monetary policy we must assess how quickly it is appropriate to bring inflation back to 2 per cent. Several factors need to be taken into account; the reasons for the deviation from target, the size of the deviation and how we expect real economy factors such as growth and employment to develop. The two-year horizon should be regarded as a restriction as to how much consideration can normally be given to real economic developments. Situations may arise where the deviations are substantial and it is reasonable to allow longer than two years for inflation to return to target. In this way we can avoid excessive fluctuations in real economic activity. However, I would like to emphasise that this kind of strategy only comes into question when it will not jeopardise the credibility of monetary policy. A desirable monetary policy should also be predictable in order to make it easier for households and companies to adapt to new economic conditions. Changes in the repo rate should therefore normally be made gradually and not in large steps, as I see it. Of course, there may be other reasons to avoid large changes in interest rates. Changing the interest rate gradually gives, for instance, some scope to give consideration to the real economy, while enabling us to wait for and analyse new economic information.
Following the Barings episode, banks were required to publish their balance sheets on a monthly basis; whilst this heightened awareness of competition between the banks, ultimately it did little to change the role of the Bank in overseeing the sector. The Bank’s interaction with firms continued largely unchanged and the system of regulation relied on the Bank’s soft power (partly derived from its position as defender of the gold standard) and willingness to intervene in a crisis as the lender of last resort (or at least coordinate such a response). During the first half of the twentieth century, the status of the Bank (as a private institution with semi-public responsibilities and lack of statutory powers) explains in part why the system of regulation relied on a high degree of self-regulation and a light supervisory touch throughout the early decades of the 1900s. Nonetheless, in the rushing about at Threadneedle Street to deal with the Barings crisis more than a century ago I can clearly discern people doing what I and colleagues have had to do at various times when firms have been under stress over the last decade – it is called supervision. 5 6  Ibid, p.137 Ibid, p.148 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  A number of factors began to change the nature of supervision in the UK. First, the Bank’s nationalisation in the 1940s moved it onto a different footing as a truly public institution.

Prasarn Trairatvorakul: Economic transformation and inclusive growth in frontier economies Welcome and opening remarks by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the conference on “Economic transformation and inclusive growth in frontier economies”, jointly organized by the International Monetary Fund (IMF) and the Japan International Cooperation Agency (JICA), Bangkok, 28 January 2013. *  *  *  Ministers and Central Bank Governors, Distinguished guests, Ladies and Gentlemen, 1. It gives me great pleasure and honor to welcome each and every one of you to Thailand, and more specifically, to the Conference on “Economic Transformation and Inclusive Growth in Frontier Economies”. This event is the second in a series of conference jointly organized by the International Monetary Fund (IMF) and the Japan International Cooperation Agency (JICA). 2. The topic of the conference is timely and relevant to current developments in the region. Frontier economies are new and becoming large markets. They all have the potential to grow into tomorrow’s emerging economies. In recent years, we witness faster economic growth in frontier economies than larger emerging economies. We have seen frontier economies integrate into the regional and global economy. 3. Frontier economies are full of potential. However, continued efforts on strengthening policy frameworks are still needed. This is to ensure long term economic growth and sustain robust economy. And I believe that today’s conference will contribute to these efforts as we will share and learn the appropriate lessons of others. One can leap jump the process, without repeating the mistakes.
In any case, this indicator tends to overstate the deterioration in firms’ solvency since, in most cases, the level of earnings in 2020 will not be representative of future earnings. Higher debt and lower earnings impair the ability of some firms to repay their debts. However, the longer term to maturity and the lower interest rates on new loans granted during the crisis, compared to pre-existing debt, are significant mitigating factors as they 5  Net debt is financial debt (i.e. interest-bearing borrowing) minus liquid assets. Liquid assets are the sum of cash and other equivalent liquid assets, short-term financial investments in shares (not including shares of group companies), short-term financial investments in securities and other short-term financial investments other than credits. Net assets are assets net of non-interest-bearing borrowing. 11  contribute to reducing firms’ debt burden. Also, many of the new loans, in particular among those arranged under the loan guarantee programme, include a grace period of one year, a feature which contributes additionally to reducing the burden of debt in the short term. In the future, firms’ debt burden will mainly depend on the extent of the economic recovery. This deterioration in corporate credit quality has been reflected in rating downgrades. The downgrades have affected to 13% of outstanding volume of fixed income debt issued by Spanish corporates.

According to micro simulations conducted by Banco de España staff, 68% of firms would have liquidity shortfalls2 between  2  The definition used here considers that a firm has a liquidity shortfall when cash inflows, basically arising from the sales of products or services, are below the payments relating to their operating activity (supplies, rentals, financial expenses and personnel costs) and those arising from their decisions to invest in fixed assets and debt repayments. 3  April and December 2020, almost 10 pp higher than under a counterfactual scenario of no pandemic3. It is estimated that the corporate sector’s overall liquidity shortfalls between Q2 and Q4 2020 will amount to around EUR 230 billion. Ignoring liquidity needs associated with investment in fixed assets, which are less relevant for liquidity risks as this expenditure has a lower degree of commitment and can more easily be avoided, the liquidity shortfall during the same period is estimated to be around EUR 25 bn higher than under the no-pandemic counterfactual scenario. Additionally, results show that more than half of these liquidity needs could not be covered through the use of both firms’ liquid assets and the undrawn amounts of their credit lines. These simulations also show that a prominent portion of firms’ aggregate liquidity needs would be generated by companies of low credit quality, which are expected to have more difficulty gaining access to credit, especially in periods of high uncertainty and increasing concerns over credit risks.
BIS central bankers’ speeches  15  Chart 14: Sterling appreciated significantly since March 2013 before moderating recently 130  Sterling trade-weighted USD per £ Euros per £  120 115 110 105 100  Index (March 2013 = 100)  125  Jan 16  Dec 15  Oct 15  Nov 15  Sep 15  Jul 15  Aug 15  Jun 15  Apr 15  May 15  Mar 15  Jan 15  Feb 15  Dec 14  Oct 14  Nov 14  Sep 14  Jul 14  Aug 14  Jun 14  Apr 14  May 14  Mar 14  Jan 14  Feb 14  Dec 13  Nov 13  Oct 13  Sep 13  Jul 13  Aug 13  Jun 13  Apr 13  May 13  Mar 13  95 90  Source: Bank calculations. Conclusion The three factors I have described are guides to monetary policy decisions, but there are no magic thresholds.23 This journey doesn’t have a set timetable; only an expected direction of travel. In my opinion, we need to see cumulative progress in these three areas to have reasonable confidence that inflation is on track to return to the target and that a modest tightening in monetary policy will be necessary to ensure it does so sustainably.

The SNB’s mandate is still to ensure price stability. The minimum exchange rate has decreased the deflationary and recessionary risks associated with a massively overvalued currency. It is entirely in line with our mandate. Furthermore, there is no risk of inflation in Switzerland for the foreseeable future. However, the SNB does recognise that the long period of low interest rates we are experiencing constitutes a danger to the stability of the financial system. The domestic credit and real estate markets are vibrant and there are concerns about the possible build-up of imbalances, which could eventually lead to price corrections and substantial losses in the Swiss banking sector. There is no doubt, however, that, in the current context of global economic indications of downside risks to the Swiss economy, current interest rate levels and the minimum exchange rate are vital. Any concerns about the housing market must, therefore, be addressed by alternative means. The SNB thus advocates the introduction of a “countercyclical capital buffer”, a macroprudential tool targeted at the specific situation we are experiencing. If the SNB’s recommendations are implemented, the banks will be legally obliged to meet specific equity capital requirements as soon as certain indicators on the real estate and mortgage markets show signs of unsustainable growth. The concept of central bank independence is widely recognised in our country. The fact that an independent monetary policy best serves the interests of the country is rarely disputed.
Moreover, we must recognize that the rest of the world is closely monitoring our ability as a nation to come to grips with our long-term fiscal challenges, and to pay our debts when they come due. This is an important litmus test of our credibility and ability to exercise global economic leadership. But the challenges extend far beyond fiscal policy. We, as a nation, have to take steps that facilitate the needed structural adjustment of U.S. economic activity that will position us to thrive in the next chapter of global economic transformation. We need to make sure the next business cycle will be more sustainable than the last, which was built on an unstable foundation of asset price gains, easy credit and outsized financial-sector profits. This will require a shift in orientation from consumption to export and investment-led growth. As EMEs have shown us, comparative advantage and global competitiveness are not inevitable consequences of factor endowments – they are the result of the choices we make as nations. There are no easy answers or quick-fix solutions. But in this regard, ensuring broad access to educational opportunity and improving opportunities for people to retool their skills mid-career so they can compete in a rapidly evolving global economy are important. So too is ensuring that regulation is calibrated such that it achieves public policy goals in the most efficient manner possible, with the least compliance costs and unnecessary delays. A continued commitment to open markets and free trade is essential.

First, the increase of inflation and rise of interest rates to balance its impact, as well as the respective effects passed through in the economic and financial sector from this interaction, have been the remit in all recent meetings and forums with national and international partners and homologue. The structure of re-pricing credit portfolios, which are dominant in our banking system, has enabled banks to begin to transfer this effect to borrowers, while the relatively high share of non-interest bearing accounts on the liability side has provided for the increase of interest margins, at least temporary. But the increase of credit cost bears the risk of non-performing loans growing in the future, so far as borrowers' solvency has not proportionally increased with the price upsurge. The development of abilities to foresee and assess in an objective manner the solvency of the existing clients – without being inclined to fast and short-term profits, which may harm an already established long-term relationship - will be one of the main challenges in the next year. Second, requirements on capital (macro-prudential buffers and requirements on regulatory capital instruments and eligible liabilities) will continue to increase in  3/4  BIS - Central bankers' speeches  compliance with the regulatory provisions and the respective gradual application programme in 2023.