samchain/econo-pairs-v1 huggingface dataset:
Inflation in the long run Most of Sweden’s most important trading partners have inflation targets in one form or another. Usually, these are a target for the inflation rate of around 2 per cent a year, see Table 1. More common for interest rate to be limited by lower bound When the long-term level of the global real interest rate is low, there is an increased risk that the nominal interest rate will reach its lower bound in future economic downturns. Many have therefore argued in various contexts in favour of raising the inflation target.8 This increases the distance to the nominal interest rate’s lower bound and makes it easier to stimulate the economy in a recession. At present, for instance, the Bank of Canada is reviewing the country’s inflation target, including an analysis of potential consequences of raising the inflation target.9 If the nominal interest rate remains at zero, the real interest rate can be cut in the short term to a lowest level of –2 per cent, with an inflation target of 2 per cent. If the inflation target and inflation expectations were instead 4 per cent, the real interest rate could be cut in the short term to –4 per cent. Even though interest rates have fallen below zero in Sweden and a number of other countries, the correlation between a higher inflation target and a short-term possibility to attain a lower real interest rate remains.

Henry Ohlsson: Decision today, consequences far into the future Speech by Mr Henry Ohlsson, Deputy Governor of the Sveriges Riksbank, at a breakfast event, organised by Swedbank, Stockholm, 18 March 2016. *  *  *  I would like to thank Bo Enegren, Hanna Köhler, Gustaf Norrefeldt, Cecilia Roos-Isaksson, Marianne Sterner and Ulf Söderström for their help with this speech. Accompanying figures and the table can be found at the end of the speech. Some of the decisions we make only have significance for the here and now. Others may have consequences for many decades to come, in some cases for the rest of our lives. Our choice of education and purchase of a home are examples of decisions that have considerable significance over a long period of time. For a person who puts themselves in debt through decisions with long-term consequences, it is of course important how high the interest rates on the debt are. And this does not concern the interest rates paid now or in the medium term, but also interest rates several decades ahead. In recent years, interest rates have been at their lowest level in modern times. Several other central banks have done as the Riksbank and cut their policy rates below zero, and government bond yields at longer maturities are now at historically low levels. This is partly due to the prolonged recession following the financial crisis.
The latter should aim at broadening the potential growth rate of Albania and underpinning its macroeconomic sustainability. In what follows I will elaborate on these issues, beginning first with a brief overview of the recent developments in global economy. The recovery of global economic activity persisted in the second quarter of 2010, while indirect or preliminary data show more moderate growth rates in the third quarter. Economic outlook remains highly uncertain due to the fiscal stimulus withdrawal and the private sector’s (unsatisfactory) soundness. Growth in advanced economies and in our main trading partners was moderate due to the correction of private sector’s balance sheets, weak lending and labour market, and low consumer confidence. The low capacity utilization rate has yielded weak inflationary pressures at a global level. The financial markets continue to show high levels of volatility in response to the concerns over the economic outlook and the long-term sustainability of fiscal indicators. In political terms, maintaining macroeconomic co-ordination at a global level and keeping open channels of the movement of goods, capital and technology, are considered priority measures to avoid a second recession. This would certainly provide substantial contribution to the Albanian economy, which remains a net borrower in the global market and that has benefited largely from the growth of demand and global trade in the form of higher exports in 2010. In light of these developments, and being largely affected by them, the Albanian economy has grown progressively over the year.

The favourable liquidity situation facilitated the rapid transmission of the key interest rate cut to the interbank and the primary market, hence allowing for the reflection of this cut in other interest rates in the economy as well. The Bank of Albania considers that the inflationary pressures remain well contained all through the time frame of the monetary policy effect: the effect of supply-side factors is expected to be offset by the downward pressures arising from the performance of demand in economy. The projections for inflation and inflationary expectations remain well-anchored around the Bank of Albania’s target. Therefore, the central bank considers that monetary conditions in economy are adequate to warrant the safeguard of price stability in the medium-run and to boost economic development further. The Bank of Albania will, in response to actual and expected economic and monetary developments, continue to pursue a prudent monetary policy, thus providing the required monetary conditions for achieving the inflation target and safeguarding macroeconomic stability. 4  BIS Review 170/2010
Emerging markets in Asia and Latin America are now showing fairly good growth, while growth in the industrial nations in Europe and North America remains low. The fact that different parts of the world economy are developing fairly differently creates problems that have significance for monetary policy. The low short-term interest rates and good access to liquidity in Europe and North America make it attractive to borrow in the short term to invest in assets with a high expected yield. There have been reports of large capital inflows to several of the emerging markets. These inflows tend to push up asset prices – for instance, house prices and share prices – in several Asian countries. At the same time, the experiences gained from the financial crisis over the past year and during the Asian crisis of the 1990s indicate that these flows can change direction abruptly, which creates a risk of substantial falls in asset prices in the future. It is difficult to say what the consequences of the capital flows we are now seeing will be for the development of the world economy in the period ahead, but there is a risk that imbalances will be generated. Development in the economies that are now growing fairly quickly may be affected in the future either by tendencies towards asset bubbles or appreciating currencies, which would have a negative impact on their competitiveness.

What is the reason for this? It is largely due to developments in Sweden’s real economy in relation to other countries. The Riksbank’s forecasts for the exchange rate are based on changes in the real exchange rate reflecting differences in growth in relation to other countries and being consistent with foreign trade, being balanced in the long run. Relative growth and the current account explain changes in the real exchange rate Countries that have a higher GDP growth than their trading partners usually have a stronger real exchange rate. 26 The real trade-weighted krona rate has been on average 30 per cent weaker during the period since 1993 than it was in the 1970s. Figure 6 shows Sweden’s GDP in relation to TCW-weighted GDP abroad. We can see that Swedish GDP in relation to other countries fell heavily from the 1970s until the beginning of the 1990s. The Riksbank’s assessment is that the weakened exchange rate from the 1970s to the 1990s is linked to lower growth in Sweden than abroad. As we can see in Figure 6, Sweden has over the past 15 years recovered some of the relative GDP level and had higher growth than other countries. This tendency is expected to continue over the coming years, which would in this case imply a stronger real exchange rate. One factor that is often discussed in connection with the exchange rate is the development of the current account.
It is successful as we copy the institutional setup of the central banks of the developed countries, where the independence of central banking is recognized as one of the main preconditions for efficient conduct of the monetary policy and the exchange rate. Fortunately, political institutions in the country understood that, too, and therefore it is general assessment that today NBRM enjoys a significant level of independence, both formal and actual. However, it is most important that we are aware where and how much we lag behind the central banks of developed countries, how much we must work in order to reduce the gap and where we should arrive at. We should improve a number of contemporary analytical and research models and practices. We should expand our knowledge in the area of economic modeling and econometric techniques. As a matter of fact, in a month or two we start with regular training of the NBRM employees in this area, in a systematic and permanent manner. We are already preparing for outlining and implementing other monetary strategies, as it is imposed by the processes of globalization and integration of markets, the forthcoming very close full liberalization of the capital account, justifiably anticipated larger inflows of capital, which create new environment for our economy, together with the risks from instability and speculative pressures.

In this period the following had to be done: •  introduce the new Macedonian national currency - Denar;  •  surmount inflation, which at the time of the monetary independence equaled around 1.200 percent on annual level;  •  overcome the accumulated problems in banking, managed primarily by debtors;  •  repay the so-called "frozen" foreign currency deposits to the depositors, as the first precondition for restoring the confidence in banking;  •  build capacity in the Central Bank itself for pursuing an independent monetary policy and efficient banking system supervision;  •  establish a modern payment system. Many of these issues were successfully solved. Manu of them are still being successfully treated. The national currency was successfully introduced, inflation was surmounted, and in the past 12 years it has been on average on the level of only 2.2 percent, annually. The function of prudential supervision has been established, which is continuously being improved and upgraded. Payment operations are conducted smoothly. So is the function of the government's fiscal agent. The capacity for conducting the monetary policy is in constant progress. From April 1992 until December 1995, the National Bank applied a monetary targeting strategy, with the money supply M1 being the intermediate target. At that time, mainly direct instruments were used: selective credits, minimum liquidity, compulsory CB bills, discount rate and reserve requirement.
This is broadly reflected in the latest December 2019 Eurosystem staff projections, which foresee inflation at 1.1% in 2020, 1.4% in 2021 and 1.6% in 2022. At the same time, annual HICP inflation excluding energy and food is expected to be 1.3% in 2020, 1.4% in 2021 and 1.6% in 2022. The monetary policy stance Against a backdrop that remains clouded, the euro area economy still needs strong support from monetary policy. The policy stimulus that is in place is working its way through the economy and is expected to support growth and job creation, a key precondition for inflation to move towards our medium term inflation aim. Hence, at the last meeting, the Governing Council confirmed its forward guidance on the ECB’s policy interest rates, asset purchases and reinvestments. According to our guidance, we expect to maintain the key ECB interest rates “at their present or lower level until the inflation outlook robustly converges to a level sufficiently close to, but below, 2% within the projection horizon.” While rate guidance has been effective in steering rate expectations along the short- to mediumterm portion of the term structure, our ongoing net purchases, at a monthly pace of € billion, act primarily on the longer end of it. We also continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase programme for an extended period of time “past the date when we start raising the key ECB interest rates”.

They are also well above the levels generally seen in neighbouring countries. For example, European banks of a size similar to Iceland’s banks have capital ratios of just over 18% and gearing ratios of about 8%. Elsewhere in the world, capital ratios are higher than those in Europe in some cases. Furthermore, many observers consider the actual capital in the European banking system is too limited and that Europe is therefore not the best reference for Icelandic banks. Nonetheless, there is some scope to lower the banks’ capital ratios — and gearing ratios in particular — with dividend payments and changes in the composition of capital. On the other hand, the banks are being cautious in maintaining a so-called “management premium” over and above the Financial Supervisory Authority’s minimum requirement, as it could erode confidence in the banks if their capital ratios fall below the minimum were they to face only mild headwinds. Moreover, the banks must bear in mind that the countercyclical capital buffer is currently 1.25%, but the Financial Stability Council has signalled that it could increase it in stages to 2.5% as the financial cycle gets more wind in its sails. In assessing a desirable level for the banks’ capital, it is important to remain aware of the costs and benefits. At times, international discussion of this topic has been somewhat misleading and, to some extent, affected by bank executives’ interest in maximising their own remuneration through risk-taking, knowing that a portion of possible losses would be absorbed by taxpayers.
14  2020 (f) Mar.19 Report  Dec.18 Report  2021 (f) Mar.19 Report  Mar.19 Report  3.25-4.25  3.0-4.0  2.75-3.75  3.0-4.0  2.75-3.75  3.8 3.9 6.0 3.3 4.1 5.0 -2.7 20.9 22.6  3.7 3.9 6.2 3.3 3.6 4.5 -2.9 20.1 21.8  3.3 3.6 3.9 3.5 2.8 3.0 -2.8 20.8 22.8  3.5 3.7 4.3 3.5 2.9 2.9 -2.7 20.3 22.0  3.3 3.5 3.9 3.4 2.9 2.6 -2.7 20.4 22.2  Fig 12 CPI inflation forecast (1) (2) (3)  CPIEFE inflation forecast (1) (2) (3)  (annual change, percent)  (annual change, percent)  6  6 6  6  5  5 5  5  IPoM Dec.18  4 3  IPoM Mar.19  2  4 4  3  2 2  2  1 1  0  0 0 16  17  18  19  20  4  3 3  1  15  IPoM Dec.18  21  IPoM Mar.19  0 15  16  17  18  19  20  21  (1) As from January 2019 the new indexes with 2018=100 annual base are used, so they are not strictly comparable with past figures. (2) Gray area, as from first quarter of 2019, shows forecast.

The lesson here is to look at the economic substance, not the legal form. Securities lending Most accounts of the crisis give a headline role to SIVs, money funds, securities dealers and, as I shall come on to, the RMBS market. There has been rather less daylight, especially outside the US, around the somewhat obscure but very significant role played by the securities lending markets. The vanilla securities lending market is straightforward and important: it intermediates the loan of securities (equities, bonds or whatever) by asset managers to short sellers who need to deliver securities to settle their transactions. Securities lending is absolutely vital to effective market making, and thus to efficient capital markets. Asset managers hold their  4  BIS Review 6/2010  securities with custodians and, ultimately, in Central or International Securities’ Depositaries. Many enter into a service agreement under which their securities can be lent out by an agent. That provides the basis of a parallel, financing market. This is big, perhaps $ 6 at its peak. Say a Treasury Bond is lent out not against collateral in the form of securities but against cash, as is normal in the US market and had been growing in Europe before the crisis. The cash collateral can then employed in the market, ie it is lent to counterparties, usually secured. During the boom, risky assets, including ABS and CDOs, were increasingly accepted as collateral via so-called triparty repo arrangements, under which they were sometimes grouped with more innocuous securities with similar ratings.
It should also be complemented with structural reforms that improve the security of supplies and reduce vulnerability to adverse global conditions and addresses market imperfections that propagate inflationary pressures. Let me now turn to financial stability and macroprudential policy. Financial stability may well be at its most vulnerable at the cusp of the ongoing shift in monetary policy, coupled with uncertainty on the euro area economic growth path spurred by the energy crisis. In such a regime shift, macroprudential policy has definitely a role to play. Financial cycles are notoriously elusive to economists, as we lack a stable standard by which to gauge them. So rather than worrying too much about where we are exactly in the cycle, we should focus more on making sure that the system is adequately equipped to withstand possible shocks. COVID-19 has taught us a few lessons here. As macroprudential authorities, we need to ensure that our banking systems are resilient in the face of risk materialisation, which remains elevated in the euro area. This week, fellow eurozone countries reported that they not only stepped up their macroprudential measures, but are also using combinations of tools from the framework to buttress further the resilience of their financialsystems. Management buffers mitigate the risk of procyclical impact on lending, preserving resilience. These are not popular measures in any country. But macroprudential authorities must remain true to their primary objective - to ensure financial stability, just as monetary authorities need to remain loyal to price stability.

This of course implies that demand pressures would continue to support inflation over the short and medium-term. Furthermore, even if trading partners were to enter a technical recession at the turn of the year, imported inflation may not fall significantly. The pass through from higher commodity prices might not have filtered through the entire pricing chain in the economies of our trading partners and though a number of commodity prices have corrected, they still remain high from a historical perspective. This assessment may seem surprising against the background of a 200 basis points increase in policy rates since July and the intention of the ECB's Governing Council to lift these rates higher as needed. It is easier to comprehend when one considers that the transmission of the latest policy rate hikes to retail prices is not immediate, the still elevated levels of excessliquidity held by banks and the private sector, and, last but not least, the significant fiscal support aimed at counteracting the effect of high inflation on households and businesses. In effect, monetary and fiscal policy are no longer at the present juncture pulling in the same direction. As regards monetary policy, with the latest rate hikes the ECB has already made significant progress in withdrawing monetary accommodation. Furthermore, interest rates are expected to be the main tool for adjusting the stance. But to achieve our objective of anchoring inflationary expectations close to 2% rate normalization needs to be complemented with balance sheet normalisation.
They are particularly appropriate for online purchases;  •  Cards offer you additional protection if what you purchased is lost, damaged or stolen as the credit card statement can vouch for the fact that you bought the item even in the absence of the original receipt;  •  It helps you build a credit line which can be used by the credit reference company to support your creditworthiness when applying for a loan; and  BIS central bankers’ speeches  1  •  In the case of emergencies, a card can become handy in paying for requirements which may be completely outside your budget. These are some of the basic conveniences of credit cards which will come about with the extensive use of this instrument in this country. Apart from the cardholders, credit cards have other wider advantages which impact on the greater economy. From our perspective as a Central Bank, we are keen to promote the use of non-cash and more efficient payment systems for its convenience, flexibility and security. We consider it as one of the instruments that can contribute to the promotion of financial inclusion as has been clearly demonstrated in other countries where cards are a common tool for the settlement of financial transactions. In the United States, for instance, 80% of households have at least one credit card.

The other is how difficult most of us in western Europe find it to understand how rapidly things are moving and how much has already occurred in these countries. The image of a west European with shopping bags full of aid to the poor neighbours in the east still remains, while we are incapable of seeing how much we can pick up from the new member countries. How poor are the candidate countries? I should like to begin with a critical examination of the picture we normally give of the applicant countries. Two common illustrations of the economic side of the EU enlargement eastwards are graphs showing the development of production since the fall of Communism and a table of the income differences between east and west. If we look at the statistics summed up in the European Commission's reports, GDP per capita adjusted for purchasing power (PPP), the gap certainly looks huge. The riches of the 10 central and east European candidate countries, Slovenia, with 72 per cent of the EU average, and the Czech Republic, with 60 per cent of the EU average, are around as poor as countries like Greece, Portugal and Spain were before they joined the EU. However, the poorest countries in the applicant group, Bulgaria and Rumania, have only approximately 25 per cent of the EU average. The graphs for production levels since 1990 look equally gloomy, only at the end of the 1990s do they reach the same level as at the fall of the Berlin Wall.