samchain/econo-pairs-v1 huggingface dataset:
However, since the third quarter of 2003, the break-even inflation rate has hovered at around 2.2 - 2.3%, breaking the ceiling defined by the Governing council of the ECB. In a context of rising oil prices and soaring commodity prices, this may reflect concerns about future price developments in the euro area and thus accelerating inflationary expectations. However, there is also anecdotal evidence that the demand for indexed government bonds by insurance companies, pension and hedge funds, has increased slightly over the recent months, pushing the prices of indexed bonds up and, consequently, their real yields down. As a result, break-even inflation rates may have been distorted upward, for some reasons not directly related to changes in expected inflation. This latter point raises the issue of the drawbacks and potential biases affecting indexed yields, increasing the difficulty to interpret correctly and decipher the movement behind the changes in the nominal yields. I will constitute the second point to my presentation. 2. The biases in the break-even inflation rate. The break-even inflation rate may be a good measure of expected inflation. It should however be cautiously interpreted and analysed as it may also be severely biased. When I previously introduced the concept of the break-even inflation rate, I assumed both efficient and arbitraged markets but also perfect foresights and no risk or liquidity premia. Since this seems unlikely to hold in practice, we should then consider that the break-even inflation rate is only related to, but not equal to, inflation expectations.

Let me briefly outline some of the biases we need to take into account in the context of our economic and financial assessment. For the sake of simplicity, I will distinguish two main categories of biases: technical biases and institutional biases, leaving aside the treatment of risk aversion considerations, which tends to introduce an upward bias in the break-even inflation rate. Technical biases The compound and the convexity biases: the definition of the break-even rate as the difference of the conventional nominal bond yield and the inflation - indexed bond yield is a first order approximation which does not take into account interest rate compounding. Consequently, the break-even rate is an upward biased estimator of expected inflation - provided that inflation expectations are positive4. Interest rate compounding has also another implication as it implies that bond prices will respond in an asymmetric manner to changes in the yield: indeed, bond prices are more sensitive to a fall in yields than to an increase in yield, and therefore, will also rise when the volatility of the yield increases, therefore pushing down the forward rates5. The net convexity adjustment will therefore bias the breakeven inflation rate either upward (the most likely) or downward. The inflation lag: by construction, bond cash flows can not be adjusted instantaneously for actual inflation. This implies that the break-even inflation rate includes another bias reflecting the discrepancy between the lagged and the contemporaneous inflation rate.
We must therefore be vigilant and be careful when taking the decisions that lie ahead. The Central Bank’s next comprehensive analysis of economic developments and prospects will appear in Monetary Bulletin in mid-May. Honoured guests: As has been reported, the Central Bank bought large amounts of foreign currency in 2015 and has continued to do so this year. From May 2013, when the Bank began its regular FX purchase programme, until the close of business yesterday, the Bank was a net buyer of foreign currency in the amount of 471 b.kr. Some of this currency has been used to pay down foreign debt and the rest to increase the size of the foreign exchange reserves. Both of these measures increase the proportion of the reserves financed in krónur. At the end of February, the reserves totalled 721 b.kr. including 382 b.kr. financed in krónur. This has reduced foreign liquidity risk, of course, but it would also have a large negative impact on the Bank’s finances if such an arrangement persisted, as domestic interest rates are much higher than the rate of return on the reserves. This point is discussed in greater detail in the Bank’s Annual Report, which is available here today. The report states that, as of year-end 2015, the negative interest rate differential on the Bank’s foreign exchange balance was 18 b.kr. on an annualised basis. The forthcoming auction of offshore krónur could change this position radically, however, and as a result, there is no reason to despair about the Central Bank’s finances.

The structure and condition of the financial system at any given time is determined by historical factors, economic and market conditions, the regulatory environment, technology, and culture and ethics. The Central Bank and the regulatory environment are also part of the financial system. The public sector can affect developments in the financial system through the regulatory framework, through transactions with the system – not least through the Central Bank – and by affecting culture and ethics. At present, the system is shaped by the financial crisis and the responses to it, including the capital controls. It is a relatively homogeneous system dominated by three domestic-oriented banks with similar business models and risk profiles. The capital controls, implementation of international regulations, and more stringent Icelandic regulations on foreign exchange risk all affect the banks. The capital controls will be lifted, but much of the regulatory environment will remain. Risk in the financial system has diminished markedly in recent years as resilience has grown, which can be seen in capital adequacy and funding; furthermore, liquidity relative to the scope of operations is much greater than before the crisis. The three largest commercial banks’ combined capital amounted to 669 b.kr. at the end of 2015. The banks’ equity ratios have risen by nearly a third since 2010, from 21% to 28%. In real terms, their equity has increased by 180 b.kr. over this period. Furthermore, the banks’ foreign exchange imbalances have been reduced, and the regulatory framework prevents excessive risk-taking in foreign currencies.
2  BIS central bankers’ speeches  The former include most notably the pick-up in the world economy since last summer. The turnaround has chiefly been based on the better performance of the advanced economies, including the European countries, which remain our main trade partners. Conversely, the emerging economies are losing some of their momentum. Indeed, investors and analysts have shifted their chief concerns in recent months towards this group of economies. The incipient recovery in Spain is also benefiting from the easing of financial tensions in European markets. In particular, measures by the European Central Bank and the headway made in correcting the weaknesses detected in the governance of the euro, and in creating a banking union within the area, have contributed to improving the financing conditions of the Spanish economy. That said, the cost our households and firms still have to pay for their credit remains overly high for the accommodative stance of monetary policy, revealing that it is not yet appropriate to talk about the full normalisation of the single monetary policy transmission process in the euro area. Undoubtedly, however, domestic impulses are playing a decisive role in improving perceptions of the Spanish economy, and in laying the foundations for a sustained path of recovery. These include most notably the progress in correcting imbalances and in adopting reforms in different areas. As regards imbalances, the most visible achievement has been in restoring competitiveness and in correcting the balance of payments deficit.

For example, there is a duty today on imported children’s clothing and on shirts, suits, jackets and trousers for men and boys. As the world economy recovers, import price inflation will edge up. A rise in labour costs of more than 5 per cent will then only be consistent with the inflation target if the krone continues to appreciate. In the long run, wages must be compatible with the value added that is generated by workers, i.e. labour productivity. Over time, the increase in real wages is therefore determined by developments in labour productivity. In Norway, productivity growth has averaged 1½-2 per cent over the last 20 years. If this continues to be the case, an increase in nominal labour costs of around 4-4½ per cent in the long term will be consistent with the inflation target. There is an important interaction between monetary policy and fiscal policy. According to the guidelines for fiscal policy, petroleum revenues are to be phased in approximately in pace with the expected real return on the Government Petroleum Fund. This guideline implies that fiscal policy will contribute to stimulating aggregate demand in the Norwegian economy every year for many years ahead. The guideline also implies that the use of petroleum revenues will increase as long as the Petroleum Fund is expanding. Variations in oil prices are accompanied by considerable fluctuations in government petroleum revenues from one year to the next. It is important to prevent these fluctuations from spilling over to the mainland economy.
Eddie George: Financial stability and the City the evolving role of the Bank of England  Speech by The Rt Hon Eddie George, Governor of the Bank of England, at the London Chamber of Commerce Conference, held in London, on 13 June 2000. *  *  *  Thank you, Chairman. I’m pleased to take part in this Conference, and to share the platform this morning with Gavin, but also with Howard Davies my long-standing partner in crime - or perhaps I should say in crime prevention. You ask me to talk about the evolving role of the Bank of England, in relation to financial stability in particular, which I’m happy to do. In fact it is rather easier to talk confidently about our role these days since it is now more clearly defined. A remarkable thing about the earlier legislation - the 1946 Bank of England Act - was that it made no mention of the Bank’s essential “raisons d’être” - what we were there to do. It seems to have been taken for granted that everyone knew what our role was. But about a decade ago we decided to define our core purposes more precisely for ourselves, primarily for internal management reasons. We identified three core purposes. The first two: –  the maintenance of monetary stability; and  –  the maintenance of the stability of the financial system are key objectives of central banks pretty well everywhere.

And the City has continued to play a very active part in developing market activity in the new currency ever since. In many respects the City is already an integral part of the Eurozone. There were those who argued that the City would suffer if the UK failed to join from the outset. That clearly has not so far happened - quite the reverse. The argument now is that we will suffer if we don’t join reasonably soon. That’s not something you can actually prove either way. It’s not a general point about the City’s competitiveness. It’s euro-specific, with the implication that somehow or other obstacles will be put in our way. That possibility cannot be altogether excluded, but it would be illogical. Most of the people that I talk with recognise the positive contribution the City is making to the development of euro financial markets - it is in fact the most positive contribution that we can make from the outside. Of course it represents competition with other European financial centres, but at the macro-economic level such competition is a positive - not a zero - sum game from which borrowers and lenders and market intermediaries collectively all stand to gain. Certainly the City has benefited from the euro’s introduction, but not at the expense of other centres, rather alongside them.
The supervisory work needs to take the overall systemic situation into account but the macro analysis they need could well be performed elsewhere and shared with the supervisors. The next question is what kind of mandate the central bank needs for its financial stability work. This is a tricky issue. An inflation-targeted monetary policy is relatively straight-forward, but how to define “financial stability”? A seemingly precise definition, without matching tools, could lead to failures and reduced confidence in the central bank, and also for its monetary policy. On the other hand, if the definition is too general it will be impossible for Parliament and others to evaluate how the central bank manages the task. Maybe, there could be a hierarchy of targets – a broad one in the legislation and a narrower one, which may be adapted to the actual situation, which is then communicated by the central bank to the general public on a regular basis. This is similar to monetary policy practices. A related issue is the one on central bank independence. Our present independence refers to the conduct of monetary policy. Do we need an extension so that it also covers our work on financial stability? This question has not been fully analysed yet, but I think that the politicians would hesitate to transfer such powers unless central bankers can find really strong arguments.

Adnan Zaylani Mohamad Zahid: Launch of the World Bank's Islamic Trade Finance Report Opening remarks by Mr Adnan Zaylani Mohamad Zahid, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Launch of the World Bank's Islamic Trade Finance Report, 23 August 2021. * * * Thank you to the World Bank for inviting me today. I am pleased to be part of this event to launch the World Bank’s Islamic Trade Finance Report. The publication of this special report will provide greater insights into the substantial role that Islamic trade finance can play to support trade, foster growth, and accelerate post-pandemic recovery. I therefore, wish to congratulate the World Bank for this timely contribution towards advancing Islamic finance. It was recently reported by the World Trade Organization (W TO) that global trade in goods, which has been at record highs, could be near its peak. Some indicators point to a slowing with the outlook clouded by downside risks. The biggest threat being the pandemic which could undermine the recovery. Global trade, at least in goods, has been quite robust and resistant to the economic adversity that we see in general across many sectors and economies. Indeed, W TO still expects the volume of merchandise trade to hit 8% growth in 2021 after the 5.3% drop last year while the International Monetary Fund estimates expansion of 9.7 percent in 2021. As a trading country, Malaysia has certainly benefited from this despite the pandemic-related challenges to domestic activity.
Bank of England  Page 1  The inflationary consequences of real shocks − speech by Ben Broadbent Given at Imperial College, London 20 October 2022  Bank of England  Page 2  Speech Introduction and summary Between them, the Covid-19 pandemic and Russia’s invasion of Ukraine have inflicted significant damage on the UK’s national income. Today I want to look at the link between these extraordinary shocks, the very high rates of inflation that have followed and the response of monetary policy. I will also draw one particular contrast with the potential response to easier fiscal policy. I’ll kick off with the slightly less dramatic topic of national accounting identities. One of the first things you get taught in macro-economics is that national income is equal to national output: in principle GDP measures both these things, as well as aggregate demand. Accounting identities of this sort don’t tell you anything about what causes what as they’re true by definition (though it’s useful to understand that we earn only what we produce and sell). But you might at least think, given the recovery in whole-economy output in the eighteen months since (Chart 1), that the worst of the drops in national income during the pandemic are well behind us.

This is why I think it’s misleading to say that real incomes have fallen “because of inflation”. The phrase “cost of living crisis” is closer to the truth. Closer still is this: the war and pandemic have directly and inescapably depressed real incomes; they have also, for a time, raised domestic inflation; the MPC will ensure the phenomenon is temporary; but the real-income consequences of these shocks exist either way (unless and until they’re reversed). Second-round effects: how hits to real income can result in domestic inflation and how monetary policy responds Having discussed the real consequences of these big shocks I’ll now say a word about their nominal effects (the higher of the two dotted lines in Chart 5). How is it that a rise in import prices can create upward pressure on domestic inflation and what do we know about the scale of these “second-round effects”? This has been a critical judgement for monetary policy. Prices of tradable goods are volatile and their direct contribution to overall inflation tends not to last that long – a shorter  Bank of England  Page 11  time, in particular, than it takes for monetary policy to have a significant effect of its own on inflation. The classic example is a change in oil prices. The direct effects on the CPI, most directly on petrol prices, come through quite quickly. Equally (and unless the price of oil keeps rising) that also means they drop out of the annual rate of inflation after a year or so.
Increasingly not. Where firms fail to provide their own authoritative disclosures, customers, investors and rating agencies will attempt to construct their own. And that’s not good for your financial health: because disagreement between different measures of a firm’s climate performance, whether driven by poor data or otherwise, increases equity risk premia, and hence the cost of raising investment finance.15 It increases the overhead from dealing with investor queries or resolutions on ESG issues, which have risen this year despite the Covid-19 pandemic.16 And it will leave you scrambling when disclosure becomes mandatory. The FCA is already consulting on proposals that firms listed in the UK will be expected to make a TCFD disclosure.17 And the EU Taxonomy Regulation will make green revenue and expenditure disclosures obligatory for those falling within its jurisdiction. Setting out pathways to mandatory TCFD disclosures should be a priority for public authorities; in the UK this is being explored by the Government-led taskforce on climate disclosure.18 If that gives the case for disclosure in principle, what makes a good disclosure from the perspective of effective capital markets functioning?

17  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  17  Chart 16: The ESG integration framework  Source: CFA Institute37  Chart 17 shows a range of such strategies.38 The simplest approach is a ‘screen’, in which the asset manager constructs a portfolio by including, or excluding, certain companies or sectors. Such approaches are currently popular because they can be directly linked to investors’ wishes (eg ‘no fossil fuel producers’), and require little in the way of sophisticated climate metrics. But they cannot provide much of the solution to a credible path to a carbon neutral economy. While individual investors may be able to divest, the financial  37  https://www.cfainstitute.org/-/media/documents/survey/guidance-case-studies-esg-integration.ashx The Investment Association’s Responsible Investment Framework provides an alternative taxonomy: https://www.theia.org/sites/default/files/2019-11/20191118-iaresponsibleinvestmentframeworkglossary.pdf  38  18  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  18  system as a whole cannot. And divestment strategies based on backward-looking carbon metrics give no scope for incentivising climate-enhancing investment in high-carbon sectors. Chart 17 Strategies for integrating climate considerations in asset allocation decisions  A ‘theme’ strategy aims instead to look across sectors, constructing portfolios of assets issued by firms with a particular climate approach. Examples include firms focusing on the production of climate-enhancing technologies, firms with credible transition strategies in place, or sharing a common supply chain. Depending on the theme chosen, such strategies typically require somewhat more granular and timely climate metrics than screens. But they remain somewhat binary in composition, and can lack diversification.
SPEECH DATE:  2021-05-20  SPEAKER:  First Deputy Governor Cecilia Skingsley  VENUE:  SEB (digitally)  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  Adapting to new conditions – monetary policy freedom with responsibility* 19 March, 2020. It's 6.30 am. I am standing waiting for a connecting bus at Danvikstull, on my way to the Riksbank at Brunkebergstorg. The telephone rings. It turns out to be Stefan Ingves, Governor of the Riksbank. He says that the Federal Reserve is offering dollar loans to us and a number of other central banks. We Executive Board members had already had many conversations both in the office and over the phone during the preceding days. Both in Sweden and abroad, the pandemic quickly led to a fall in economic activity of historical proportions. It was necessary to ensure as soon as possible that the financial system could manage to maintain credit granting at very low interest rates. A financial crisis on top of a health crisis and the rapidly emerging real economic crisis must be avoided. On the previous Thursday, 12 March, the Riksbank had decided to offer up to SEK 500 billion in loans to Swedish banks for onward lending to companies. On 16 March, the Riksbank decided to begin broad asset purchases for up to SEK 300 billion. And what happened with the dollar loans?

Both internal and external monitoring and oversight play an important role in ensuring behavioral norms are maintained, sound processes and procedures are being followed, and there is open communications across reporting lines. Limited contact with managers and leaders within the organization has the potential to leave employees lacking clear guidance, feeling isolated, and willing to take on more risk. In large complex organizations, this is also likely to vary across business lines, heightening the need for clear and consistent leadership and guidance from multiple levels within the organization. In response to these dynamics, we have seen financial firms take a number of steps over the past few months focused on mitigating behavioral risk associated with the pandemic and working remotely. For example, some firms have leveraged prominent instances of misconduct and customer abuses of coronavirus relief programs to reiterate clear expectations and standards around integrity and personal accountability for employee actions. Others have intentionally placed cultural leaders over businesses in need of a stronger control environment. This indicates that the pandemic may be leading to opportunities to grow cultural capital, or at least ensure practices are in place to ensure it is not eroded. Finally, perhaps the experience of shared uncertainty could have a positive impact on culture, particularly with respect to fostering greater empathy. I’ve certainly seen examples within my own organization of people stepping up when colleagues that are under greater personal pressure need more time to manage their external commitments.