samchain/econo-pairs-v1 huggingface dataset:
We were offering overnight repos of up to $ trillion, as well as substantial amounts of term repos of longer maturities.2 The sizeable offerings were designed to meet the markets’ needs and provide confidence that liquidity would be available. At their peak in mid-March of 2020, our repo operations reached nearly $ billion. But repos alone were not enough to restore smooth market functioning. The FOMC also directed the Open Market Trading Desk at the New York Fed to engage in large-scale purchases of Treasury securities and agency mortgage-backed securities (MBS) to support smooth functioning of those markets. The pace and amount of asset purchases during this period was unmatched. During the worst of the crisis last year, the Federal Reserve was purchasing more than $ billion of Treasuries per week, which was more than the Treasury purchases in the entire first round of quantitative easing in response to the Global Financial Crisis. And in the three months starting in the middle of March, the Federal Reserve purchased more than $ trillion of Treasury and agency MBS combined. These actions, along with prompt fiscal measures enacted by Congress and emergency steps taken by the Federal Reserve and other government agencies, ultimately proved successful at restoring functioning in the Treasury and other financial markets. Together, these measures averted what could have been a severe financial crisis that would have had devasting effects on the economy. But they are also a stark reminder that these markets are not nearly as resilient as they should be.

The Imperative of Resilience After studying this event and others, the IAW G has proposed a number of principles to guide public policy for Treasury market reform.3 It has also established several workstreams to study aspects of the Treasury market and help us achieve our collective objectives of financing the government efficiently, supporting the broader financial system, and implementing monetary policy. The IAW G’s No. 1 principle and No. 1 workstream center around improving market resilience. I think it’s safe to say that strengthening resilience is at the top of everyone’s Treasury reform list. Resilience is the imperative of all markets—and that is especially true in the Treasury market because of its central role in the financial system. The adage of the financial markets is that Treasuries are safe havens, even in the most turbulent times. The Treasury market has been able to absorb many shocks through the years. But as the world changes, the market, too, evolves. The growth of electronic trading has transformed the mix of 2/4  BIS central bankers' speeches  intermediaries and trading practices. Firms now increasingly have access to multiple financial markets, and markets are increasingly interconnected. When the Treasury market breaks down, when trading is disrupted, or when interest rates move in ways that are not based on fundamentals, the ripple effects can be swift—and devastating to the flow of credit to businesses and households. What we’ve learned during crises is that when the flow of credit to the economy is at stake, we must act quickly and decisively.
For domestic institutions that particular issue was settled by the Banking Act 2009, and the new resolution powers were successfully deployed by the Bank to deal with the Dunfermline Building Society in March. What other powers are required? There is a broad consensus that our traditional policy instruments need to be augmented by a “macro-prudential” toolkit. But what are such “macro-prudential” instruments for? Are they to increase the resilience of individual banks, or are they to protect the economy from the banks? The former implies a sensible extension of the current regime of capital requirements for individual institutions. The latter goes to the heart of the problems caused by the financial sector as a whole for the rest of the economy. We need to reflect more deeply on the nature of the failures before designing a regulatory response – after all many financial markets continued to function well. But banks entered the crisis with historically low levels of liquid assets, and inadequate levels of capital with which to absorb losses. Moreover, in the United Kingdom, the financial sector became too big and too highly leveraged. First, the size of our banking system was, as a proportion of GDP, five times that in the United States, and the risks to the UK taxpayer correspondingly greater. Second, the process of reducing very high leverage is doing great damage to the rest of the economy.

Thus, we have made limited progress in closing the substantial output gap that was created during the recession. A similar conclusion is drawn from an assessment of labor market conditions. Although the unemployment rate has declined by about 2 ¾ percentage points since peaking at 10 percent in October of 2009, a significant portion of that decline reflects the substantial decline of the labor force participation rate over that period. It should also be noted that since the previous business cycle peak at the end of 2007, the decline of the labor force participation rate has been more than accounted for by a decline in participation of people in the prime working age of 25 to 54. The inflation data are also consistent with this overall picture of an economy operating well below its full potential. Total inflation, as measured by the personal consumption expenditures (PCE) deflator, has been quite volatile in recent years due to sharp fluctuations in energy prices. Core inflation, which excludes the volatile food and energy components and thereby may be a better guide as to underlying inflation, slowed from around 2 percent in early 2012 to just above 1 percent in mid-2013. In recent months it has shown signs of stabilizing, but remains well below the FOMC’s expressed goal of 2 percent for total inflation. Fortunately, inflation expectations remain relatively stable at levels somewhat above the current inflation rate. This stability should help prevent an undesirable further drop in inflation relative to our 2 percent objective.
A further possibility is to temporarily ease the State aid framework for the business sector and establish certain temporary limits on retail electricity prices. More broadly, the war has underlined the need to accelerate European integration so that the EU is an important player on the global stage, capable of deciding its own future and defending its values. A cornerstone of this integration is the creation of a common and permanent fiscal capacity in the euro area, which would facilitate the economic policy response to severe shocks. The design of this common fiscal capacity must be based precisely on the lessons learned from NGEU and the instrument for temporary Support to mitigate Unemployment Risks in an Emergency (SURE), which were implemented to deal with the pandemic, and on any lessons we might draw now from our response to the war. The financial realm is a second area of economic integration. Pan-European bond issuances to fund NGEU, and any other potential issuances as part of the response to the invasion of Ukraine, are an important step towards creating a European safe asset. In addition, deeper capital market integration in the euro area would pave the way for greater risk-sharing in the face of asymmetric shocks. Lastly, a third necessary element to bolster the euro area’s institutional architecture is the completion of the banking union, establishing a European deposit insurance scheme and a common framework for resolving systemic crises.

Purchases under the public securities purchase programme commenced on 9 March and, to 31 March, had reached over € billion, of which more than € billion related to purchases of Spanish public debt by the Banco de España and the ECB itself. With this expanded asset purchase programme in train, monetary policy may be said to have exhausted its room for manoeuvre. It should be added that the programme is already yielding its first fruit in terms of wholesale funding market prices and, more importantly, signs of easier financing conditions for households and firms. The politics of the Monetary Union I would like to conclude with some thoughts on the political environment in the euro area and its relationship to the economic recovery and the improvement in employment throughout the area. The crisis that commenced in 2007, which is still not completely over, has obviously exacted a high cost in terms of political support for what Monetary Union means. The Monetary Union, whose ultimate justification lies in the advantages it brings for economic growth and welfare, entails a common monetary policy and, as a corollary, relinquishing the possibility of using devaluation of the exchange rate as a national instrument to correct monetary and fiscal imbalances, and also the possibility of central bank financing of budget deficits (known as “monetary financing”). In this situation, there is no way of correcting imbalances other than by means of an “internal devaluation”, i.e.
Interbank funds and securities transfer are performed via the Interbank Clearing – Real Time Gross Settlement System that is supervised and operated by the Central Bank. This system commenced operation in April 1992. In 2000, the second generation Electronic Fund Transfer System replaced its predecessor. Today, Electronic Fund Transfer System is a real-  BIS Review 21/2008  1  time gross settlement system in line with best international practice. Payments are settled individually on the accounts and transferred to receiver immediately. Thanks to the infrastructure provided by Electronic Fund Transfer System, institutions and individuals can make any kind of payments in real time through telephone banking or internet banking services free of charge or with minimum cost. A noteworthy feature of the payment system is that it was designed to process both large value and low value transactions. The Central Bank of Turkey also established Interbank Clearing – Electronic Security Transfer and Settlement System for real time electronic transfer and settlement of government bills and bonds. The system has been taken into operation in 2000 under the supervision of the Central Bank of Turkey. It is fully integrated with the Electronic Fund Transfer System and operates under delivery versus payment principal. The third pillar of the payment system in Turkish economy is the Interbank Cheque Clearing Houses Center. The Clearing House is a private legal entity that carries out the clearing and settlement of cheques under the supervision of the Central Bank.

Regulatory and supervisory authorities should strengthen prudential and other financial market regulations in order to deepen financial markets and improve investment climate, whereas central banks should focus more on greater currency flexibility and price stability. In conclusion, as a central banker, I would like to highlight three key messages from the thoughts I have shared with you. First, to achieve price stability, central banks need to ensure efficiency of financial infrastructure and maintain smooth operation of financial services. An efficient and effective payment and settlement system is at the core of financial infrastructure. Second, removing market imperfections is essential for the smooth operation of financial systems. Establishment of credit bureaus to improve exchange of information on credit history of economic agents and reducing fiscal dominance are important steps to ensure sound-lending activities. In this context, the role of micro finance in promoting the access of the low-income segment of the society to credit should be supported and encouraged. Third, the overall level of external financing and its composition is important for domestic access to finance. The benefits of capital inflows to economic growth would be higher with a developed financial sector. Central banks could best support this process through their contribution to macroeconomic stability. Thank you. 4  BIS Review 21/2008
Thus, while each policy must act on the basis of its individual objectives, the consequences each has for the other should be taken into account. Macroprudential policy in practice identification and monitoring of systemic risk Timely activation of macroprudential tools calls for indicators that enable the risks arising in the financial system to be monitored and which, in parallel, allow the use of the instruments and their effects to be calibrated. 12  In particular, these indicators should be capable of capturing the financial cycle. The literature has identified various indicators that can play this role. For example, Terrones et al. (2011) consider three main variables on the basis of which these indicators can be calculated: credit to the non-financial private sector, house prices and stock market prices. Thus, in the case of the CCyB, current regulations give a special role to the credit-to-GDP gap (also known as the “Basel gap”). This indicator measures the difference between financing received by the non-financial private sector as a percentage of GDP and its longrun equilibrium trend, estimated using statistical procedures. Positive credit-to-GDP gap values would indicate that we are in the expansionary phase of the financial cycle, since the volume of credit, once the economy’s level of income is taken into account, stands above its equilibrium level. Consequently, activating the CCyB or increasing it might be considered. Negative values would denote a contractionary phase in the financial cycle, whereby the CCyB should be deactivated under normal conditions.

We can conclude from the results that the activation of the countercyclical buffer in financial cycle upturns gives rise to an easing in credit and GDP growth under the baseline scenario, but, above all, it significantly reduces the severity of the decline in GDP in an economic crisis situation. Moreover, the probability of crises occurring diminishes. These effects would occur with a lag of around two years. The release of the CCyB in crisis periods would mitigate the adverse effects on economic growth, both under the baseline scenario and at the extreme percentile. And, furthermore, its impact would be immediate. 15  In the case of the tools that fall on borrowers, their activation in financial cycle upturns would have similar effects to those of the CCyB. The main difference is that their effects are more immediate: i.e. around one year as opposed to the two years mentioned in the case of the CCyB. This suggests an order for the activation of the different instruments under normal circumstances: the tools that increase banks’ capital requirements should be activated first and, if the risks identified do not abate, the second instruments should then be activated. According to this same evidence, it is found that the release of the macroprudential instruments that fall on borrowers in crisis periods does not significantly impact GDP growth expectations or their distribution. This is perhaps due to the fact that, habitually, it is the banks themselves that restrict these lending standards in contractionary phases.
I should highlight that these instruments are only available and tradable between the onshore banks and will not replace Bank Negara Monetary Notes (BNMNs). BNM interbank bills will be recognised as a high-quality liquid asset (HQLA) under Basel III Liquidity Coverage Ratio. Before I conclude my remarks, let me raise two more points that involve all of you here. First, an issue on competition for deposits. Towards every end of the year, banks rush and compete for deposits in an effort to show a good loan-to-deposit (LDR) ratio. This is disruptive behaviour. In particular, corporates, through their short-term deposit shifting, pushes up rates and create significant distortions. This is damaging to all. Borrowing costs will rise. All will be impacted. Corporates will also suffer in the end, through higher longer term borrowing costs because of these unnecessary biddings. From another perspective, time and again, we have explained that banks should not be fixated on the LDR ratio. It is a simplistic indicator. It cannot provide an accurate representation of evolving bank balance sheets and funding strategies. We need to rely on other important indicators. As we start to transition into Net Stable Funding 6/7  BIS central bankers' speeches  Ratio (NSFR), this ratio together with Liquidity Coverage Ratio (LCR), are the more reflective indicators of banks’ funding profile and liquidity positions. Banks will be given sufficient time to adjust before implementation of the NSFR.

Consequently, lower oil price reduces foreign exchange earnings of the country and government’s revenue from the oil industry; Second, there is this perception, even among FX dealers and traders, that the offshore market knows how to correctly price or is better at valuing the ringgit. Despite its opaqueness and suspicious pricing, the offshore market is perceived to be better, bigger and deeper than the onshore market, and that its price discovery process is more robust in indicating the direction of the ringgit. As a result, the onshore market is looking offshore for guidance on the direction and pricing of the ringgit. Third, there is also the perception that the onshore market lacks the necessary liquidity, and with the decline of the offshore market, this negative perception has been driving the ringgit exchange rate weaker. The lack of liquidity has been attributed to the inability for our forward FX volume in the onshore market to replicate the offshore market; Fourth, the significant non-resident participation in the onshore bond market is the main reason for the market’s liquidity. Consequently, the market perceived that the reversal of NR holdings will have negative bearing on the ringgit and market liquidity; And last but not least, the gross misperception on the adequacy of the reserves. There is this perception that reserves of less than USD100 billion is not sufficient to provide comfort to investors. Accordingly, market pessimism reaches new levels when it falls below the threshold.
On the international level, we are working hard at rethinking the Basle Capital Accord, an international agreement on minimum capital standards, developed by the Basle Committee on Banking Supervision, first put in place in 1988. The Committee, which I have chaired since June 1998, is attempting to make certain that banks hold an optimal level of capital based on their risk appetite and their demonstrated ability to manage risk. Also, with the help of many of you in this room, central bankers and security regulators from around the world are working together through the International Organization of Securities Commissions and the G-10 central bank Committee on Payment and Settlement Systems to develop a clearer understanding of global securities lending markets. At the end of the day, however, it is market discipline that will make the crucial difference. In my view, market discipline involves three key elements, each of which is equally important: the continuous questioning of market assumptions regarding adequate compensation for risk, the relentless pursuit of more advanced risk management techniques, and the conviction to assess business decisions over an appropriately long time horizon. My experience with financial markets and institutions has convinced me that diligent market discipline – rather than increased regulation – is the essential variable in ensuring the future health and efficiency of the global capital markets. I believe that it is in the mutual interest of private and public sector participants alike to support this effort. ***  BIS Review 8/1999

INFLATION AND MONETARY POLICY Inflation in Singapore has been within expectations—on a modest uptrend but still below historical norms. MAS Core Inflation this year is expected to average in the upper half of the 1–2% forecast range. Core inflation averaged 1.5% in the first five months of 2018, up slightly from 1.4% in Q4 last 4 / 11  BIS central bankers' speeches  year, mainly due to higher retail inflation. It is projected to rise gradually over the course of 2018, with the gradual absorption of remaining slack in the labour market and the attendant pickup in domestic demand. CPI-All Items inflation is similarly projected to be in the upper half of the 0–1% forecast range for 2018 as a whole. Accommodation costs are forecast to decline less sharply than last year, while private road transport inflation is expected to fall. MAS’ inflation forecasts are robust to alternative outcomes for key external prices, including the upsides to global oil prices. MAS has revised its global (Brent) oil price assumption to an average of $ per barrel for the year as a whole, up from $ previously. MAS undertook a measured tightening of monetary policy in April this year after keeping to a neutral stance for two years. The slope of the $ nominal effective exchange rate policy band was increased slightly, consistent with a modest and gradual appreciation path. The gradual normalisation of monetary policy was appropriate in the context of the continued mild ascent of core inflation since H2 2016.
A further example connected with the same argument concerns the delegation of the management of the state finances to the Swedish National Debt Office – the state’s own internal bank. That "allocation of responsibility” is also important for monetary policy. I spoke earlier about occasions long ago when the central bank was forced to use its banknote printing presses to finance government deficits that for various reasons had got out of hand. This type of behaviour is of course incompatible with price stability. It is therefore important for the credibility of monetary policy that there are rules for how state borrowing should be handled and that monetary financing is forbidden. According to the law, the Riksbank shall not "…extend credit to or purchase debt instruments directly from the state, another public body or an institution of the European Union.” 1 In Sweden it is another authority, the Swedish National Debt Office, that finances the national debt and grants state guarantees and loans. Another reason why the political system has delegated monetary policy to an organisation with expertise in this field, is that it in many ways concerns technically complicated operations. This has also been done in the case of many other authorities, which are responsible for technical issues that are important to society. And this is in itself natural.

The expansionary credit policy, combined with monetary financing of large general government deficits in turn put foreign exchange and monetary policy under considerable strain. The result was hardly surprisingly inflation and a depreciation of Sweden’s currency. Today the time when Sweden’s central bank could be forced to finance war efforts in far-away countries seems very distant. Of course, the financial system was also entirely different a couple of hundred years ago. But the fundamental principles for the credibility of monetary policy and that it should not be possible to use the central bank for “short-term” purposes, remain largely the same. …and experiences closer to our time. There are also examples of the importance of a clear framework for economic policy even in modern times. At the beginning of the 1990s Sweden underwent the deepest economic crisis since the Depression of the 1930s. This also came to be a rather dramatic conclusion to almost 20 years of stabilisation policy problems. The economic policy conducted in the 1970s and 1980s was for various reasons overly expansionary and not compatible with the monetary policy objective of the time – to maintain a fixed exchange rate. Price and wage developments repeatedly came on a collision course with the fixed exchange rate target and Sweden suffered cost crises. As a temporary solution the krona was devalued when the situation became acute – a strategy they adopted on no less than five occasions in just seven years. But the depreciation of the krona did not solve the fundamental problem.