samchain/econo-pairs-v1 huggingface dataset:
Much of the Fed’s ability to respond as effectively as it did during this crisis, whether it was from a monetary policy, a “lender-of-last resort” or a supervisory perspective, came from its breadth and depth of knowledge and experience with financial institutions, financial markets and financial market infrastructure, both inside and outside of the United States. That said, there is also no question that the Federal Reserve and other regulators could have done more to prevent this crisis. That is why, even as the Fed has engaged in extraordinary efforts to stabilize the financial system over the past couple of years, it has also been moving quickly to make the internal changes necessary to strengthen our effectiveness. In addition, the Fed has been working with other regulators in and outside of the U.S. to craft and implement the broader changes in regulation and supervision that are necessary to make our financial system more robust and resilient going forward. Turning to the outlook, the recession now appears to be over, but the economy is still weak and the unemployment rate is much too high. These circumstances underpin the FOMC’s commitment to keeping short term rates exceptionally low for an extended period. However, at the same time, it deserves emphasizing that the Federal Reserve will be willing and able to exit from this period smoothly when the time comes to ensure that inflation stays low and inflation expectations well anchored.

This will support the banking sector’s ability to make long term sustainable business plans into the future. In fact, central bank governors and heads of supervision indicated that they are committed to not significantly increase overall capital requirements across the banking sector. In the euro area, the situation in the banking sector now is very different from what it was in 2012. Perhaps most importantly, euro area banks have significantly strengthened their capital positions over the past few years, notably as a consequence of the Comprehensive Assessment conducted in 2014. For significant institutions, the CET1 ratio has increased from around 9 to 13%, making them more resilient to adverse shocks. In addition, the quality of the banks’ capital has also been substantially improved. With the 2015 Supervisory Review and Evaluation Process (SREP), the ECB has outlined the steady-state Pillar 2 supervisory capital requirements. This means that, all things equal, capital requirements will not be increased further. Hence, the banking sector can now conduct much better capital planning. Moreover, in 2015, the banks under ECB supervision further increased profits relative to 2014. This allows banks to have appropriate distribution policies while still meeting regulatory capital requirements and buffers, and to support lending to the economy. In addition, the ECB’s monetary policy actions continue to support banks’ financing conditions and, more broadly, economic activity. Clearly, some parts of the banking sector in the euro area still face a number of challenges.
What was worse was that there was almost a sense of acceptance of such performance among many officials of both the MoF and CB, who harboured the internal view that it may be our country’s “karma” to have low growth, large fiscal deficits and high inflation! In fact, many Central Bank officials were often heard to lament that the continuous high fiscal deficits of the Government was pushing inflation up and grumble that the Government will never stop doing that. In turn, MoF officials used to complain that the tight and in-sensitive monetary policies of the CB was the root cause for the fiscal deficit always being out of control! BIS central bankers’ speeches  9  It was therefore clear that a change in attitude and a change in action was vital. It was also necessary to make some effective interventions to change the equilibrium of this vicious cycle, so that a fresh equilibrium could be created. Le Chatelier, the famous French Scientist who introduced the “Equilibrium Law” to the world in 1898, had taught us that, in order to disturb an equilibrium, you only need to disturb one component of the equilibrium. Then, the entire system will move into a new equilibrium. So, a key decision had to be made, as to which of the offending components of our vicious equilibrium should be disturbed and dealt with first. Towards that end, I remember, having several “one-on-one” discussions with the Secretary to the Treasury, Dr. P.B.

Mr. Chairman, having said that, we will now discuss some case studies that would throw some light about the degree of harmonization that took place between the policies of the Central Bank and the Ministry of Finance, in order to deliver some of the vital results to our country and economy, over the past 7 years. Case Study 1: Opening out Sri Lanka Treasury Bills and Bonds to foreign investors Mr. Chairman, the first case study that I would like to cite is the November 2006 move to open out Sri Lanka Treasury bills and bonds to foreign investors. By late 2006, in Sri Lanka, a massive infrastructure development programme had been launched, and the critical humanitarian operation had begun. These twin programmes had demanded a regular, steady and massive flow of funds, and it was becoming increasingly clear that we would not be able to secure the new fund requirements only via local taxes and local borrowing. If such a quantum of funds were to be sourced from within, an enormous pressure would have been exerted upon the entire economy. In fact, such an attempt would have pushed interest rates to unacceptable levels, and may have even dragged the economy towards negative territory, and placed the entire monetary system at considerable risk. Such fears may have perhaps been one of the reasons that prompted successive governments of the past, to avoid large scale infrastructure development programmes or attempt to launch a full scale counter action programme against terrorism.
Under the Act, all government revenues from the oil sector are to be transferred to the Fund, and the net budget surplus is to be invested in international markets. At the time, in the midst of a deep recession, many doubted that any petroleum revenues would ever be saved. Projections indicated that offshore petroleum production would peak in the early 1990s. However, during this decade, the government’s cash flow from the petroleum sector started to increase sharply. Slide 7: The fund mechanism and fiscal policy The policy guidelines were clarified in 2001. Rules governing the interaction between Norway’s petroleum wealth and fiscal policy were established. Under the fiscal rule, the government can only spend in the annual budget, on average over an economic cycle, the expected real return on the Fund – estimated at 4 per cent annually. At the same time, Norges Bank was charged with the task of keeping inflation low and stable. Thus, our traditional fixed exchange rate policy was abandoned. A clear division of responsibilities between monetary and fiscal policy had been put in place. 2  BIS central bankers’ speeches  After two decades of spending petroleum revenues more or less as they accrued, the fiscal rule enabled the government to save for future generations. At the same time, the rule made fiscal policy more robust: By decoupling spending from current petroleum revenues, the fiscal rule provides for a gradual and sustainable phasing-in of petroleum revenue spending. The fiscal rule is no straitjacket; it allows automatic stabilisers to work.

Miguel Fernández Ordóñez: Labour market experiences – towards more efficient labour markets Opening speech by Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, at the high-level seminar on Labour market experiences: towards more efficient labour markets, International Monetary Fund (IMF)–Banco de España, Madrid, 11 May 2010. *  *  *  Let me first thank you all for accepting the invitation to participate in this high-level seminar on “labour market experiences: towards more efficient labour markets”. In particular I would like to thank Olivier Blanchard, chief economist at the International Monetary Fund, for participating in this event and accepting to share with me these introductory remarks. In fact, the idea of organising this seminar was originally from the IMF, which last autumn suggested staging this event, mindful as it was of the potential role played by the Spanish labour market institutions in explaining some of the specific inefficiencies of our economy. The Fund viewed the conference as a way of promoting discussion about possible avenues of reform. The Research Department of the Banco de España then took up the IMF’s baton, drawing on its long tradition of sound economic research and deep analysis on this topic. We are certainly proud to have been able to assemble such an eminent and diverse group of professionals on the occasion of this event in Madrid.
With regard to monetary policy, this is precisely one of the key rationales behind the ECB Governing Council’s decisions and recent statement. Specifically, last December we extended the horizon for net purchases under the PEPP to at least the end of March 2022 and, in any case, until we judge that the coronavirus crisis 6  phase is over. We will also continue to reinvest the principal payments from maturing securities purchased under the PEPP until at least the end of 2023. Furthermore, we expect interest rates to remain at their present or lower levels until we have seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within our projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics. Also, net purchases under our asset purchase programme (APP) will continue at a monthly pace of € billion and will run for as long as necessary. Our intention is for them to end shortly before we start raising the key ECB interest rates. We also intend to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when we start raising the key ECB interest rates, and in any case for as long as necessary. In any event, we stand ready to adjust all of our instruments, as appropriate, to ensure that inflation moves towards our aim in a sustained manner, in line with our commitment to symmetry.

Against this background, the gradual recovery in  domestic demand is expected to continue into the first quarter (Figure 27). However, I would also like to emphasize that the achievement of a two-digit annual growth rate is highly probable in the first quarter of 2010 due to the low base of the same period last year. The weak course of external demand continues to restrain economic activity and employment growth through its impact on industrial production. As a matter of fact, despite the recent partial recovery, indicators such as per capita hours worked across industries and capacity utilization rates of firms oriented towards export markets suggest that resource utilization remains low throughout the economy (Figure 26). The recovery in the labor market that started in the third quarter of 2009 continued into the fourth quarter, albeit at a slower pace. Unemployment declined in seasonally adjusted terms, but still remains elevated (Figure 28). Given that ample slack would continue to be a drag on investment and employment, signs of improvement in employment data during the second half of 2009 are not expected to turn into a robust recovery, suggesting that the unemployment rate will likely remain elevated for an extended period. Therefore, unit labor costs would continue to support disinflation (Figure 29). Overall, recent data releases suggest that the economic recovery has become more robust. Domestic demand would continue to recover, while the weak outlook for global growth would dampen economic activity and employment in the tradable sector for sometime.
My view is that reducing the Federal Reserve’s balance sheet and raising short-term interest rates are two different, yet related, ways of removing monetary policy accommodation. Therefore, I would expect that, when we begin to end reinvestment, we will have to consider the implications for the appropriate short-term interest rate trajectory. In conclusion, financial conditions are important. They matter enormously to monetary policy because their movements can often diverge from the trajectory of short-term rates, and because they affect economic activity and the economic outlook. While it is essential to account for financial conditions appropriately in conducting monetary policy, it is also important not to overreact to every short-term wiggle in financial markets. In addition, it is important to remember that the policy goal is not the level of financial conditions per se, but the achievement of the Federal Reserve’s dual mandate objectives. Sometimes, that will be consistent with easing financial conditions, and at other times, it will be consistent with tighter financial conditions. At all times, our focus will be on achieving our objectives of maximum sustainable employment and price stability, thereby supporting the livelihoods of households and businesses throughout the United States. Thank you for your kind attention. I would be happy to take a few questions. 1 Ozge Akinci, Nicola Cetorelli, Richard Crump, David Lucca, Jonathan McCarthy, Paolo Pesenti and Joseph Tracy  assisted in preparing these remarks.

Here in the Federal Reserve’s Second District, many households in both our urban and rural communities are vulnerable financially. And since the onset of the pandemic, access to quality, nutritious food has been greatly impeded. After many businesses were forced to shut down in the spring of 2020, food banks were quickly overwhelmed. In addition to an abrupt increase in need, there was also the challenge of distribution. I’m sure many of you remember the long lines to food pantries that stretched through neighborhoods. And many of our schools shifted from providing free lunches to students to offering grab-and-go meals to entire families. Now, we are facing another economic challenge: higher food prices. Transportation and labor costs—along with supply-chain disruptions—are driving up the price of many staples, such as beef, poultry, eggs, peanut butter, and produce. Food is not only becoming far more expensive for families, but also for food banks—which, at the same time, are reporting fewer donations. The result of all of this is that food insecurity is becoming more widespread—and more difficult to resolve. The ripple effects expand across the economy, as food insecurity drives economic inequality, which in turn is a barrier to cultivating a healthy workforce. And a healthy workforce is what we need to keep our economy strong. At the New York Fed—and across the Federal Reserve System—one of our key areas of focus is to better understand the economic drivers and social determinants of health.
On this basis, it can decide to transfer to direct supervision any bank or group of banks that may be considered relevant or the origin of systemic risk. This incorporates the lesson of the crisis that not only big banks can be the source of general financial instability. The SSM’s micro-prudential role will also be complemented by extensive macro-prudential powers. Unifying micro- and macro-prudential powers within the central bank aligns practice in the euro area with that in most other advanced economies. The Bank of England, for instance, will have the Prudential Regulation Authority for micro- and the Financial Policy Committee for macro-prudential issues. And there are in fact additional reasons for doing this in a multi-country monetary union like the euro area, as the level of the main interest rate may not be appropriate for all countries at all times, meaning macro-prudential tools play an important role as a “counter-weight”. A final point to note about the SSM, according to its Regulation, is that its launch will be associated with a comprehensive review of participating banks’ balance sheets. The objective of this review is to identify legacy problems and start with a system that avoids reputational risks for the SSM down the line. This process may have financial implications if impaired assets have to be written down. And this is a further reason why having a Single Resolution Mechanism in place for participating countries is a matter of urgency.

Mugur Isărescu: In support of central bank independence Address by Mr Mugur Isărescu, Governor of the National Bank of Romania, at the Conference on “The role of a central bank in modernising society – challenges in emerging economies”, organised by the National Bank of Moldova, Bucharest, 7 April 2021. * * * Dear Governor Armașu, Distinguished guests, adies and gentlemen, Good morning, Let me start by congratulating the National Bank of Moldova on the initiative of holding this conference. I believe that discussions on the proposed topic are welcome at the current juncture, when light needs to be shed both on the measures to rescue the economies hit by the COVID-19 pandemic and on central banks’ mission. The question about what a central bank can and cannot do is always on the agenda. Governments and central banks throughout the world have promptly stepped in to address the fallout from the pandemic by means of social, economic, fiscal and monetary policies. Such comprehensive and unprecedented support has proven that, in situations like this, the concerted action of the authorities – particularly monetary and fiscal ones – is critical to safeguarding the smooth functioning of markets, of economic and social mechanisms. The topic of this roundtable, The role of a central bank in modernising society – challenges in emerging economies, is however more comprehensive than the response to the challenges of the unprecedented medical crisis we are currently facing.
No bank can maintain public trust for long if  2  BIS Review 34//2005  it lacks sufficient capital, so supervisors impose capital requirements to safeguard the banking system. Since capital is the last line of defence against bank insolvency, regulatory capital requirements are one of the fundamental elements of banking supervision. I should note that strong banking supervision is not enough to ensure financial stability. While I believe that a sound financial system requires robust regulatory and supervisory frameworks, there are many other potential sources of financial instability outside the financial system. Many financial crises have not resulted from shocks arising in the financial system. Any regulatory or supervisory framework must be built on a series of preconditions and on the foundations of a sound supervisory system. With respect to preconditions, there is a set of issues that may be considered. Firstly, I think there is a broad consensus among all of us about the importance of promoting the implementation of appropriate macroeconomic policies consistent and sustainable over time. Secondly, an appropriate institutional framework is also needed. In particular, a set of mercantile and civil laws must be in place to safeguard agents' property rights. A legal and judiciary structure which provides legal security must thus be in place, together with the so-called safety net institutional arrangements, core principles. etc. Moreover, it will be necessary to consider microeconomic aspects related to payment-system and market structures.

In my speech today I would like to touch upon main elements of the forecast which are of key importance from the point of view of the decision we took today and for understanding the logic behind our future actions. I will start from the assumptions. We assume the Urals crude price this year at around 50-55 US dollars per barrel. We have reasons to expect oil prices to rise to 70–75 US dollars per barrel by 2017, but nonetheless remain significantly below the levels observed during several past years. We also assume that access of the Russian companies to the global capital markets will be restricted throughout whole forecast period. A long period of relatively low oil prices will force Russian economy to adapt to the new conditions. As a result, GDP is expected to decrease by 3.5%-4% in 2015 and 1%-1.6% in 2016. Moreover, as I have already mentioned, the structural constraints of the economy will be supplemented by factors of cyclical nature. Despite the drop in oil and other commodity prices, the net export will make a positive contribution to GDP dynamics due to the effects of the ruble depreciation on imports and Russian exporters’ competitiveness. However, net export dynamics will not be able to fully offset the reduction in consumer and investment activity during two coming years. As in 2009, contraction in the domestic demand will primarily influence durable goods, including imports, and also some services sectors.
Lending rates for very small loans, which can be taken as a proxy for loans to small and medium-sized enterprises (SMEs), have declined by almost 190 basis points. The significant improvement in funding conditions for SMEs is especially encouraging as they provide two-thirds of total private sector employment in the euro area. Heterogeneity of lending rates across countries has also fallen sharply. For example, the difference between the average lending rate for firms in countries that were severely affected by the crisis versus other countries has narrowed by around 100 basis points over this period. The pass-through of monetary policy has become more even. Banks are passing on the favourable funding conditions to their customers due to the second series of targeted longer-term refinancing operations, which further supports these positive 2 1/3  BIS central bankers' speeches  developments.2 The sharp reduction in bank lending rates has been accompanied by easier access to funding, which continues to improve in the third quarter according to newest survey results.3 Furthermore, bank lending volumes have been gradually recovering since early 2014. According to the latest Survey on the Access to Finance of Enterprises, covering the period from October 2016 to March 2017, euro area SMEs have continued to signal improvements in the availability of bank loans. Market-based funding conditions, too, have improved significantly in response to the corporate sector purchase programme launched in June 2016.

3 See the ECB’s euro area bank lending survey, October 2017, and the ECB’s Survey on the Access to Finance of  Enterprises in the euro area, October 2016 to March 2017. 4 See the box entitled, “Assessing labour market slack”, Economic Bulletin, Issue 3, ECB, 2017. 3/3  BIS central bankers' speeches