samchain/econo-pairs-v1 huggingface dataset:
I would also like to emphasise the importance of central banks’ communication in a low-inflation economy, as it is then particularly important to create stable, positive inflation expectations. 4  BIS Review 21/2004  Risks of deflation An interesting, but possibly hypothetical, question is whether there is a risk when inflation is very low of Sweden and the global economy fastening in a deflation spiral. Experiences from deflation are fortunately rather limited, but several countries suffered problems with deflation in the 1920s and 1930s. In recent times, it is primarily Japan that has experienced deflation, and there is currently a discussion underway of the causes, consequences and what would have been a better policy. The Swedish experiences from the 1930s indicate that a price stability target can contribute to slowing down a threatening deflation process. With an inflation target of 2 per cent, it could become more common in future for inflation to be negative during individual months. It is difficult to say whether or not this is a problem, as we do not have very long experience of low inflation. Of course, there is a possibility that a more lasting deflation could arise if consumers become pessimistic. In that case it would be important for the central banks of the world to take vigorous monetary policy measures in order to maintain confidence that the inflation target will be attained. Academic research in the field of economics usually highlights three costs of deflation. The first concerns the difficulty in reducing nominal wages.

As intermediaries in exchanges, stablecoins are far less effective than a settlement asset with legal tender status, insofar as (i) they are not entirely stable since their price stability depends on the value of a basket of assets, and (ii) they offer no guarantee of a refund in the event of fraud. The fact that they have no intrinsic value and that they offer no guarantee that they may be converted at par upon demand with commercial bank money or central bank money means that they cannot be used to create reliable stores of value. In addition, as pointed out in the G7 report on stablecoins issued last year, stablecoin schemes are significantly exposed to risks of various nature, including legal, financial, operational and compliance risk concerning money laundering and terrorist financing, competition law, consumer and investor protection. The risks identified must be seriously addressed if stablecoins are not to become the « weak links » undermining the safety of our payment systems. This is all the more important as some of these risks would be amplified and new risks might arise if stablecoins are adopted at a global level. Stablecoins of potentially large size and reach – so-called global stablecoins – may indeed pose additional challenges of system-wide importance both domestically and internationally, for the transmission of monetary policy, as well as for financial stability. They could also have implications for the international monetary system more generally, including currency substitution, and could therefore pose challenges to monetary sovereignty.
You will recall that in December we did not rule out that inflation might considerably exceed this level. There are several reasons for such inflation dynamics. First of all, the contribution of the VAT hike to annual inflation currently stands at approx. 0.6-0.7 pp, which is close to the lower bound of our expectations. According to our estimates, the VAT pass-through to prices has already largely materialised. This is suggested by the analysis of prices of goods and services for which the VAT was raised. These are mostly non-food goods and services. Annual price growth in most of them has accelerated only moderately. In monthly terms, it returned in February to the growth pace seen in September-December last year (seasonally adjusted); however, it still holds somewhat above 4% in annual terms. Weekly inflation estimates suggest similar developments. After a surge in the first two weeks of this year, they have dropped in recent weeks, though holding somewhat above the path that corresponds to our inflation target. Moreover, we do not rule out that the deferred effects of the VAT hike may manifest themselves in the months to come. It is also of note that in February, both monthly core inflation and most other indicators adjusted for volatile components and seasonality exceeded 4% in annual terms. There is evidence that risks that prices of certain food products may grow at an elevated pace have decreased.

They follow current changes in prices, primarily petrol and food prices, and ruble exchange rate fluctuations. The third important factor we took into account is consumer demand. Lending underpins consumption but slowing wage growth constrains a rise in demand. Consumption growth slowed down after a short-term acceleration in November, which was likely associated with preemptive purchases of non-food goods in the run-up to the VAT hike. We can see it from retail sales figures. The rise in consumer activity does not exert pressure on prices. This, among other things, is an important reason of a moderate VAT pass-through to prices. The fourth factor is external conditions. A number of changes which only started to emerge in December, intensified at the beginning of this year. The US Fed and the European Central Bank eased their rhetoric as regards the monetary policy outlook. Improvements were seen in markets’ expectations regarding the negotiations of international trade restrictions. These factors supported emerging market currencies and reduced their risk premiums. We may say that external risks declined in this part. At the same time, geopolitical risks remain in place. Oil prices in the first quarter were higher than projected in the baseline scenario. However, risks are high that oil production will exceed consumption this year. Finally, overall monetary conditions have changed little if at all since the start of the year. Deposit rates have edged higher, while loan rates have stabilised.
There is thus good reason to assume that demographical developments have contributed to an increased propensity to save in the world and thus to a lower real interest rate. 5  See Rogoff (2015). BIS central bankers’ speeches  3  The demographic effect on saving in China is worth mentioning in particular. The single-child policy contributed to a severe decline in the birth-rate. At the same time, life expectancy increased. The combination of weak social safety net and fewer children to provide for the elderly was probably an important explanation for the increase in saving in the Chinese economy. As China has become increasingly integrated into the global economy, saving in China has also been increasingly channelled to other parts of the world for investment. Increased propensity to save in many emerging markets Many other emerging markets have also increased their savings, but partly for other reasons than a change in demographics. Experiences from the Asian crisis in 1998 contributed to many emerging market countries’ central banks building up their currency reserves to be able to withstand future currency outflows. The increased demand from these countries for low-risk assets, such as government bonds, led to yields being pushed down at the end of the 1990s and until the years prior to the financial crisis. The rising demand for safe assets also contributed to an increase in the differential between the risk-free rate and the rate on higher risk investments.

This means that movements in the Libor that are not in line with the SNB’s monetary policy objectives have to be countered with a change in repo rates. Thus, over the course of the turbulence, we consistently offset changes in Libor risk premia with changes in the repo rate, as shown in chart 4. For this reason, the Libor remained in the middle of the target band during the whole episode. The Swiss franc Libor was much more stable during the turmoil than the Libor for other currencies. This simply means that we were able to protect the Swiss economy from part of the crisis-induced increase in risk premia. Libor criticised Recently, some market observers have questioned the information value of the Libor. The Libor for all major currencies is fixed daily in London by the British Bankers Association  2  BIS Review 80/2008  (BBA) on the basis of a survey of top-rated international banks. Critics argued that some banks would report unduly low Libor rates, in an effort to talk up their creditworthiness. Others claimed that the rates were too high because the panel of reporting banks was not sufficiently representative. These criticisms almost exclusively concerned the dollar Libor. The BBA has found no evidence of a systematic distortion of the Libor, and has announced that it is leaving the fixing method for the Libor unchanged. However, it will strengthen governance of the Libor fixing process, especially the monitoring of individual banks’ reports.
They make that expectation by considering the past trends and what is happening right now. If they expect that the prices on average would rise, then, they can be said to be harboring high inflation expectations. A central bank can gauge this situation by conducting periodical inflation expectation surveys. Second, a consumer price index, compiled to measure the changes in the cost of living of a given group of people, may show a continuous increase over a substantial period of time. It indicates an unstable situation in the macro economy leading to an upward movement in the general price level. The presence of either situation requires a central bank to go into action against fighting inflation. This means that, even if the consumer price index shows stability or a relatively low growth, the central bank cannot stop taking inflation fighting measures. What a central bank should do is to eradicate the cause rather than pampering with the symptoms. It is similar to a physician who does not take delight when he observes that the high fever of a patient has subsided. The physician would not stop his curative treatment, until the cause of that high fever is totally eliminated. There appears to be a general tendency for equating increases in the cost of living with inflation. An increase in the cost of living occurs when the basket of commodities consumed by a given group of people entails a higher cost. As mentioned earlier, this is measured by compiling a consumer price index.

A central bank cannot do anything about the increases in the cost of living, since it does not produce goods and services. That is why John Exter, the founder Governor of the Central Bank, remarked in his very first press interview that “…the Bank does not itself produce goods and services. It will facilitate it by creating right monetary conditions ” Implicit in these “right monetary conditions” is the need for attaining economic and price stability in its totality. Inflation is a much wider phenomenon than the cost of living. It entails the absence of stability in the macro economy leading to an increase in all the prices at the same time. A consumer price index measures the price impact on a consumption basket consisting of only consumer goods. In contrast, inflation occurs when the prices of all goods, consumption, intermediate, investment and inputs, rise at the same time. It elevates the general price level to a higher level, including those of the consumer goods. The above misunderstanding may lead to the pitfall of a central banker trying to stabilize the value of a cost of living index through artificial means. It can be attained by fixing price ceilings or granting price subsidies. But, it does not cure the malady of generally rising prices generated by rising nominal aggregate demand over the real aggregate supply. A subsidy could ease the burden on the cost of living of a given consumer or a group of consumers.
Pablo Hernández de Cos: Central banks at the frontline of the COVID-19 crisis - weathering the storm, spurring the recovery Welcome address and introductory remarks by Mr Pablo Hernández de Cos, Governor of the Bank of Spain and Chair of the Basel Committee on Banking Supervision, at session 1 of the VI Conference of Mediterranean Central Banks, jointly organised by the Central Bank of Tunisia, the Organisation for Economic Co-operation and Development (OECD), the European Institute of the Mediterranean (IEMed) and the Bank of Spain, 28 June 2021. * * * It is a great pleasure for me to welcome you all to this Conference on Central banks at the frontline of the COVID-19 crisis: weathering the storm, spurring the recovery, jointly organised by the Central Bank of Tunisia, the Organisation for Economic Co-operation and Development (OECD), the European Institute of the Mediterranean (IEMed) and the Banco de España. Let me start by thanking our colleagues from the Central Bank of Tunisia, the OECD and the IEMed and, in particular, Governor El Abassi, Ambassador Florensa and Luiz de Mello for their cooperation in organising this Conference. We could not have asked for better partners to help set up this event. Under the resolute impulse of the IEMed, this Conference is becoming a mainstay among the fora for dialogue and cooperation in economic and financial relationships in the Euro-Mediterranean region.

This initiative has seen two six-month extensions and, more importantly, it has been complemented by the introduction of a “common framework” for restructuring the sovereign debt of countries with deep-seated debt problems. Despite the limited quantitative results of the DSSI and the uncertainty surrounding the level of success of the “common framework” for debt restructuring, both initiatives represent an unquestionable improvement on the part of multilateral coordination in sovereign debt resolution. Third, the main multilateral development banks (such as the World Bank, the European 2/4  BIS central bankers' speeches  Investment Bank and the African Development Bank, among others) are also playing an important role in this crisis. Throughout the pandemic, these institutions have deployed a series of emergency measures in line with their mandates and spheres of influence. For instance, their fresh financial support to the Middle East and North Africa (MENA) region since the outset of the pandemic amounts to over USD 8 billion, adding to the USD 4.3 billion of IMF emergency financing and USD 7.2 billion of IMF financing provided through regular programmes. Finally, the recent G7 agreement to back a new global minimum tax rate for multinational companies is a step in the right direction to address the tax challenges arising from globalisation and the increasing digitalisation of economies. Undoubtedly, major steps have been taken in this crisis to strengthen international cooperation, but much ground has still to be covered.
Firstly, lower productivity growth leads agents to expect lower income growth in the future, prompting them to moderate their spending in the present. The resulting increase in saving exerts downward pressure on interest rates. Secondly, the increase in life expectancy in advanced economies has led households to increase their saving so as to finance their retirement period. Thirdly, rising demand for safe saving instruments in a context of high and growing economic uncertainty, coupled with a relatively scarce supply of such instruments, has put further downward pressure on equilibrium interest rates. Whatever its source, the decline in natural rates has shrunk the space for interest rate policy owing to the existence of a lower bound on nominal interest rates, thus making it harder for central banks to achieve our inflation aims. Climate change will likely affect the natural interest rate, but it is not obvious in which direction. On the one hand, it could further depress natural rates through negative effects on productivity, such as the impact of higher temperatures on labour supply and the destruction of capital stemming from natural disasters. Moreover, increased economic uncertainty associated with the impact from climate-related risks could lead to higher precautionary saving and further pull natural interest rates down. On the other hand, the transition towards a more sustainable economy will require substantial investment in green technologies, which may push equilibrium interest rates up. And if such investment succeeds in raising trend productivity growth, it could partially undo or even reverse the decline in natural interest rates.

It is vital that the commitments made to achieving balanced budgets by 200304 be firmly followed up in the Member States concerned. A continuation along the path of fiscal consolidation is essential, as is vigilance in ensuring strict adherence to the medium-term plans and rigorous implementation of the procedures of the Stability and Growth Pact. Equally, the expected recovery should be seen as an ideal opportunity to strengthen efforts towards implementing comprehensive structural reforms – in public expenditure and revenues and product, labour and financial markets. Heads of State and Government confirmed this objective during their recent meeting in Barcelona. If implemented vigorously, such reforms could increase the growth of real GDP and employment on a sustainable basis. Past improvements in the functioning of markets, together with wage moderation, have contributed to strong employment growth and a considerable reduction in unemployment. It is therefore clearly in the interest of all countries to continue to rigorously implement the agenda agreed in Lisbon and recently confirmed in Barcelona. We are now at your disposal for questions. 2  BIS Review 22/2002
France is not unique in this respect as several European countries have already implemented macroprudential measures. Yet we should not overestimate their effectiveness. In my view, monetary policy cannot close its eyes to financial stability, as suggested by those purists who favour a strict “principle of separation”. Instead, I favour a form of intelligent coordination, and that will be one of the challenges for our next strategic review. Monetary policy must remain accommodative but it also has to be more attentive. The necessary follow-up with fiscal and structural policies The second limitation is again a humble truth. As we have seen, monetary policy has gone beyond the call of duty. But it is not – now less than ever – omnipotent, and it cannot perform miracles. Monetary policy has no influence  Page 13 of 14  over the structural changes that are behind the exceptionally low level of the natural interest rate. To fix the euro area’s investment dearth – both in the private and public sector – relative to its savings surplus, structural growth policies are needed that boost innovation and productivity. It also means making more appropriate and differentiated use of fiscal policies. In this regard, the euro area is underusing its fiscal space: its public debt (84%) and deficit (0.9%) are lower than those of the United States (106% and 5.6%) or Japan (238% and 3% in 2019). Source: IMF  Fiscal policy, especially in those European countries with a surplus, needs to be exploited more actively and selectively.

In the euro area and the United States, R* is estimated to have fallen by between 150 and 200 basis points over the past 15 years. Page 3 of 14  The scale of this variation can only be explained by structural factors. Slower growth in the working population and in total factor productivity have led to a slowdown in the trend rate of GDP growth, and this is estimated to account for roughly a quarter of the decline.iv  Source: Bergeaud, Cette, Lecat, 2016  The other three quarters are estimated to stem from the increase in the supply of savings coupled with reduced investment demand. The global savings glut is being fuelled by increased life expectancies, rising inequality – older and wealthier individuals tend to save more – and the accumulation of foreign exchange reserves in emerging economies. Page 4 of 14  Source: IMF  Conversely, the decline in investment demand can be attributed to the rise in the non-material economy, which requires more human capital than physical investment, and no doubt to lower confidence in the future. The euro area in particular has seen a rise in its saving ratio and a marked weakness in its investment ratio since the financial crisis. Source : Refinitiv Datastream  These trends, which can be observed the world over and have been going on for a long time, are not, therefore, attributable to monetary policy: I shall nonetheless turn now to the role of central banks.
High settlement fees could discourage institutions and portfolio managers from taking full advantage of advances in risk management techniques. Finally, a high cost structure for securities settlements could influence competition among financial centres. The efficient processing of commercial and financial transactions, including those generated by securities trading, is a necessity in a marketplace as competitive as ours is in the United States today. In my view, we are likely to see much more competition among financial centres in the future because financial centres provide a source of high-paying jobs. Cities around the world will increasingly compete to be prime financial locations. In sum, your efforts in moving to T+1 are part of an industry-wide effort to reduce risk and thereby ensure that our payment and settlement system continues to work well under all conditions. We are supportive of your efforts and applaud your initiative because we all want our payment and settlement system to remain sound, secure and efficient as it adapts to the changing needs of our global economy. 3  BIS Review 93/2000

You gave your time freely and shared your ideas selflessly. Thank you. We are also indebted to our partners and trainers who have contributed on a pro-bono basis to IBF’s learning resources – working on impossible timelines to deliver high-quality training standards and study guide materials. There is a final group that I want to acknowledge, the unsung heroes of the IBF story – the past and present staff of IBF. •  From administering the CMFAS examinations to developing new industry examinations;  •  from reviewing and accrediting training programmes to certifying individuals under FICS;  •  the management and staff of IBF have been unrelenting in their commitment to raising industry standards. As we look back at IBF’s 40 years, we can take pride in what it has achieved. •  Some 200,000 participants have benefitted to-date from training courses offered or accredited by IBF. •  Close to 2,000 practitioners have been certified under the FICS Standards. One of the reasons why IBF has done well is that it has renewed itself periodically, to stay relevant and effective amidst a changing environment but always focused on its core mandate of promoting competency in finance. Today, IBF embarks on the next phase of its journey to raise industry standards. Our new mission is to “empower practitioners with capabilities for a robust Asian financial industry”. To equip our finance professionals for the next phase in Singapore’s development as a financial centre, IBF will focus on two new dimensions.